A staff member asks for a sign on the window of a restaurant in Soho, London, England, Tuesday, September 7, 2021.
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LONDON – Britain’s unemployment rate unexpectedly rose to its highest level in two-and-a-half years, data showed on Tuesday, in a tight general election in which the economy is a key battleground.
At the same time, strong wage growth has divided market observers who are considering the timing of a rate cut by the Bank of England.
The National Bureau of Statistics said the unemployment rate rose to 4.4% from February to April, up from 4.3% in the previous quarter and the highest level since September 2021. Economists polled by Reuters had previously forecast the number would remain stable.
A large amount of data also shows that the number of employees on the job in May increased by 0.6% compared with the same period last year.
In the three months from February to April, the annual salary increase rate excluding bonuses remained unchanged at 6%, and the annual increase rate including bonuses was 5.9%, well above the inflation rate.
Richard Carter, head of fixed rates research at Quilter Cheviot, said in a note on Tuesday: “What the Bank of England would most like to see is for wage inflation to fall more than it actually is, especially if headline inflation is very high. close to the target.
“The Bank of England will be extremely cautious in cutting interest rates at a time when consumer spending power is high and could trigger a new round of inflation. Therefore, today’s data will continue to suppress interest rate cuts in June or August, and November’s rate cuts will continue Suppressed. ” remains the most likely date to see the first fall. “
While markets on Tuesday were pricing in little chance of a rate cut at the Bank of England’s June meeting, with a 36% chance of a rate cut in August, the likelihood of a September review rose to nearly 60%.
Monetary policymakers from the Eurozone central bank began their own path to cutting interest rates last week.
Consulting firm Capital Economics said that while the stickiness of wage growth would be a “lingering concern” for the Bank of England, interest rates should soon move “firmly downward” as unemployment rises.
Capital’s deputy chief UK economist said: “As we forecast, wage growth may not prevent the Bank from cutting interest rates for the first time in August, as long as other indicators such as wages settlement data and next week’s CPI inflation data show good progress. “Ruth Gregory said in a note.
The figures come as politicians lash out at the state of the economy ahead of a general election in which the ruling Conservatives are widely expected to be defeated by rival Labor.
Prime Minister Rishi Sunak, leader of the Conservative Party, and Keir Starmer, leader of the Labor Party, have prioritized economic growth, living costs and taxes in their campaign messages.
