The Office for National Statistics reported a decrease in the UK unemployment rate to 4.9% in the three months ending February, down from 5.2% in the preceding three months. During the same period, average wages rose by 3.6%, a slight dip from the 3.8% growth in January, marking the lowest since November 2020. Pay with bonuses included increased by 3.8%, surpassing expectations.
These statistics predate the full impact of the Middle East conflict-induced economic shock. Economic experts caution that this conflict may lead to higher inflation and a potential rise in unemployment as businesses, facing increased costs, may reduce hiring. Wage growth in the public sector averaged 5.2%, while the private sector saw a growth rate of 3.2%.
Notably, the number of job vacancies declined in the latest quarter, indicating a decrease of 29,000 to 711,000 compared to the previous quarter. This marks the lowest level of vacancies since February to April 2021. ONS Director of Economic Statistics Liz McKeown highlighted that despite falling unemployment rates, the number of people not actively seeking work has increased, including fewer students seeking employment while studying.
Chief economist at KPMG UK, Yael Selfin, noted that wage growth was slowing before the Middle East conflict, reducing the risk of energy costs driving up pay pressures. However, the labor market’s weakened state may limit workers’ bargaining power, potentially affecting wage dynamics. Unemployment slightly declined to 4.9% in the three months to February, but is expected to rise in the future due to cost-related hiring cutbacks.
Luke Bartholomew, deputy chief economist at Aberdeen, pointed out that the drop in unemployment may not have a significant market impact, as it reflects rising inactivity rather than enhanced hiring. With wage growth moderating and inflation expected to rise, households may face a period of negative real wage growth, impacting economic growth.
These figures precede the release of crucial inflation data by the ONS, which will shed light on the early repercussions of the Middle East conflict in March.