# UK unemployment edges up but pay growth beats forecasts
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2023-04-18
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: UK Unemployment Rate Edge Up, Pay Growth Beats Forecasts
Meta Description: Find out how Britain's unemployment rate and pay growth are impacting the economy and the Bank of England's decision on interest rates. Read more
URL: https://financedigest.com/uk-unemployment-edges-up-but-pay-growth-beats-forecastshtml

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# UK unemployment edges up but pay growth beats forecasts

By David Milliken

LONDON (Reuters) -Britain’s unemployment rate rose unexpectedly in the three months to February but pay growth stayed higher than forecast, highlighting the dilemma for the Bank of England (BoE) as it judges whether to raise interest rates further.

The Office for National Statistics said the unemployment rate rose to 3.8% – its highest since the second quarter of 2022 – rather than holding at 3.7%, as forecast by economists in a Reuters poll.

Annual pay [growth for the three months to January was revised up to 5.9% and held at that level for the three months to February – well above the forecast](https://www.financedigest.com/gsk-spinoff-haleon-forecasts-2023-organic-revenue-growth-at-top-end-of-view.html "GSK-spinoff Haleon forecasts 2023 organic revenue growth at top-end of view") of 5.1% in the Reuters poll. Excluding bonuses, [wage growth](https://www.financedigest.com/dollar-jumps-as-u-s-job-gains-wage-growth-beat-expectations.html "Dollar jumps as U.S. job gains, wage growth beat expectations") held at 6.6%.

Pay continues to grow more slowly than prices, so earnings are still falling in real terms, although the gap between public and private sector earnings [growth continues](https://www.financedigest.com/different-employee-engagement-outcomes-for-u-s-and-canadian-companies-amidst-continued-economic-growth-pressures.html "DIFFERENT EMPLOYEE ENGAGEMENT OUTCOMES FOR U.S. AND CANADIAN COMPANIES AMIDST CONTINUED ECONOMIC GROWTH Pressures") to narrow,” ONS statistician Darren Morgan said.

British consumer price [inflation hit](https://www.financedigest.com/uks-december-shopper-numbers-defy-inflation-and-rail-strikes-hit.html "UK’s December shopper numbers defy inflation and rail strikes hit") its highest in more than 40 years at 11.1% in October, and was still in double digits in February.

The BoE has forecast that inflation will fall below 4% by the [end of the year as wholesale energy prices](https://www.financedigest.com/uk-house-prices-end-2022-on-a-weaker-note-after-pandemic-boom.html "UK house prices end 2022 on a weaker note after pandemic boom") fall, but financial markets see an 80% chance that it will raise borrowing costs for a 12th meeting in a row next month to 4.5% from 4.25%.

Wage pressures are a key concern for the central bank, and while the unexpectedly fast pay growth will be a concern, it may draw some [comfort from some signs in Tuesday’s data that the inflationary heat in the labour market is easing](https://www.financedigest.com/chinas-patchy-covid-easing-sows-confusion-but-comforts-investors.html "China’s patchy COVID easing sows confusion but comforts investors").

Britain’s economic inactivity rate fell by 0.4 percentage points from the previous quarter to 21.1% – its [lowest since](https://www.financedigest.com/uk-mortgage-approvals-hit-lowest-since-june-2020.html "UK mortgage approvals hit lowest since June 2020") the three months to May 2022 – while the number of job vacancies dropped by 47,000 to 1.105 million, the lowest since the three months to August 2021, although still 304,000 higher than before the pandemic.

Though optimism has been rising that the UK economy will [avoid recession this year](https://www.financedigest.com/scam-special-how-to-avoid-christmas-shopping-fraud-this-year.html "Scam Special: How to Avoid Christmas Shopping Fraud this Year"), we continue to see the labour market coming off the boil,” said Jack Kennedy, an economist at recruitment website Indeed.

As well as lower vacancies in the ONS data, data from Indeed showed that businesses were now less willing to [offer signing](https://www.financedigest.com/discount-dining-clubs-tastecard-and-gourmet-society-grow-their-offering-as-chimichanga-and-spaghetti-house-both-sign-up.html "Discount dining clubs tastecard and Gourmet Society grow their offering as Chimichanga and Spaghetti House both sign up") bonuses to staff than late last year, he added.

(Additional reporting by Sachin Ravikumar, Editing by William Schomberg)


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