The Office for National Statistics (ONS) revealed on Tuesday a significant uptick in the UK's jobless rate, which rose to 4.2% in the three months leading up to February.
This marked an increase from the previous period's reading of 3.9%, constituting the largest jump since 2020, when the nation was emerging from pandemic-induced lockdowns.
While the rise in unemployment hinted at a potential easing of inflationary pressures in the job market, concerns lingered as wage growth remained stubbornly high.
Yael Selfin, chief economist at KPMG UK, stated "Easing pressure in the labor market keeps the Bank on track for a summer rate cut." Selfin highlighted that the uptick in the unemployment rate suggests a less stringent labor market, sparking debates about the timing of the first rate cut.
The report highlighted several concerning trends:
1. The UK economy lost 156,000 jobs compared to the previous three-month period, marking the largest drop since last August, contrary to economists' expectations of a gain.
2. Real-time administrative data revealed a substantial decline in the number of employees on payroll, falling by 66,661 in March, the most significant drop since November 2020.
3. The redundancy rate, indicating firms shedding workers, rose to 3.9 people per thousand employees in the three months through February, up from 3.1 a year ago.
4. Inactivity in the labor market increased in the latest quarter, driven by individuals aged 16 to 34 years, although partially offset by more people aged 35 to 49 years returning to the labor force.
Amid these concerning indicators, there were some positive developments.
The prolonged decline in job vacancies ended, with job postings rising to 916,000. Additionally, regular private sector wage growth, a key metric of domestic inflationary pressures, edged down slowly to 6%.
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