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UK Unemployment Rate Holds Steady Amid Slowdown in Private-sector Wage Growth

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UK Unemployment Rate Holds Steady Amid Slowdown in Private-sector Wage Growth

The UK's jobless rate remained stable in the three months to May amid a further decline in job vacancies and a slowdown in private-sector wage growth, according to data from the Office for National Statistics published Tuesday.

The unemployment rate for people aged 16 years and over came in at 4.9% in the three months to May, unchanged from the three months to April. The latest reading was in line with the consensus estimate.

Meanwhile, the UK employment rate for people aged 16 years and over, was 60.8% during the quarter to May. For people aged 16 to 64 years, the employment rate stood at 75.1%

"The latest data show a relatively steady labour market picture overall, though some measures continue to suggest softening. The number of employees on payroll was broadly flat in the latest month, while survey estimates suggest employment, unemployment and inactivity rates were little changed in the latest quarter," ONS Director of Economic Statistics Liz McKeown said. "Vacancies fell again over the quarter, but by less than in recent periods. The latest decrease was driven mainly by smaller businesses, where labour and operating costs were cited as factors in not taking on new staff."

Employees' average regular earnings growth, excluding bonuses, came in at 3.4% year over year in the quarter to May for the third consecutive period, while total earnings, including bonuses, rose 4.3%.

In the public sector, the annual average growth in regular pay stood at 5.5%, higher than 5.1% in the previous three-month period, while regular earnings growth in the private sector edged down to 2.9% from 3%.

"The difference is stark between the public and private sectors. Pay is growing in excess of 5% annually in the former, while the private sector is experiencing wage growth below 3%. That's down from 6% just 18 months ago and is below the level that the Bank of England thinks is consistent with achieving a 2% inflation target over the medium-term," analysts at ING said in a note.

"This is a key factor in our call for the Bank of England to keep rates on hold this year, unless things get materially worse in the energy market. Just as we saw with the rise in headline inflation 12 months ago, the weaker jobs market should mitigate the risk of second-round effects and a long-lasting bout of price pressure."

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