UK Unemployment Rate Rises; Wage Growth Slows

(RTTNews) - The U.K. jobless rate rose unexpectedly to a near four-year high and wage growth softened in the three months to May, suggesting that the labor market is cooling.

Data from the Office for National Statistics showed that the unemployment rate edged up to 4.7 percent in the three months to May, marking the highest rate since June 2021. The rate was forecast to remain unchanged at 4.6 percent.

Payroll employment decreased 41,000 in June from the previous month to 30.3 million. The decline in employment for May was revised down sharply to 25,000 from 109,000.

The estimated number of vacancies fell by 56,000 sequentially to 727,000 in the three months to June, data showed. This was the 36th consecutive period of decline.

Average earnings, excluding bonuses, grew 5.0 percent in the three months to May, which was slightly faster than the expected growth of 4.9 percent, but slower than the 5.3 percent increase in the preceding period.

Earnings including bonuses also increased at a slower pace of 5.0 percent from the previous year, which was in line with expectations. ONS Director of Economic Statistics Liz McKeown said the labor market "continues to weaken."

An upward revision to May's payroll data together with hotter-than-expected inflation data released yesterday, takes some of the pressure off the Bank of England to cut rates more quickly, ING economist James Smith said.

Smith expects the U.K. central bank to lower interest rates in August and November, and two further cuts next year.

British Chambers of Commerce Deputy Director Public Policy Jane Gratton said despite the slowdown, wage growth outpaces inflation, and employment cost pressure is continuing to erode firms' operating margins.

Gratton added that recruitment remains challenging, and businesses cite labor costs as the biggest pressure.