UK wage growth jumps above 2%, jobless rate falls to 5.5% in March
Britain’s consumer-led recovery should extend into the summer after wage growth jumped above 2% and unemployment fell in March, according to official figures.
The pound jumped more than a cent against the dollar after the news. Analysts said the rise in wages could push the Bank of England to bring forward its first interest rate rise since 2007 to later this year, rather than in 2016.
But sterling fell back an hour after the unemployment statistics were published due to a downbeat outlook for the British economy by the Bank of England.
The Bank governor, Mark Carney, cut this year’s UK growth outlook and warned that productivity, the main impetus behind higher wages, remained weak.
Markets have expected a rate rise in 2016 after the halving of GDP growth to 0.3% in the first three months of the year. Those investors who considered bringing forward their expectation of a rate rise until this year are likely to sit on their hands as a result of Carney’s comments.
The Office for National Statistics said the unemployment rate fell to 5.5% in the three months to March, down from 5.6% the previous month. The drop of 35,000 in the number of unemployed people took the total to 1.82 million, a seven-year low.
The UK’s unemployment rate is the second-lowest in the EU after Germany, and compares with the highest rates of 25% in Greece and 23% in Spain.
Employment also improved, with the number of people in work rising by 202,000 in the three months to March to more than 31 million, the highest since records began in 1971.
The UK has an employment rate of 73.5%, which is also a record, although for men the figure is even higher at 78.4%. Some 70,000 of the extra workers were drawn from the over-65s.
David Kern, chief economist at the British Chambers of Commerce, said while the figures confirmed that the labour market remained a major source of strength for the UK economy, there were “some areas of unease”.
“The quarterly fall in unemployment was the smallest since the summer 2013 and the youth unemployment rate is still almost three times as high as the national average,” he said. “It would therefore be premature for the broad positivity in the latest jobs figures to lead to an early increase in interest rates.
Businesses need a continued period of stability in order to deliver the growth and prosperity that we want to see.”
