UK unemployment rate rises to 4.4% as labour market cools, but wage growth sticky – business live | Business

TUC General Secretary Paul Nowak says:

“These damning figures show the Conservatives have taken the jobs market from bad to worse.

“Unemployment is rising. Vacancies are falling. Insecure work is at epidemic levels. Record numbers are long-term sick. And wages are still worth less than in 2008.

“The Tories have failed working people. We need a government that will rebuild industry, create wage growth, and deliver a better living for working families.”

Today’s labour market data shows there will be no time for complacency for the next Government as the UK has a smaller workforce that is poorer and sicker than in 2019.

That’s the verdict of Rebecca Florisson, principal analyst at the Work Foundation at Lancaster University.

Florisson explains that living standards have not recovered despite strong wage growth:

“Annual nominal wage growth was 6%, with the record National Living Wage increase of 9.8% improving the pay of 3.3 million low paid workers. There are signs that the wage growth recovery has peaked.

“Despite real wages rising by 2.3% on the year, the economic impact of the Covid-19 pandemic and the war in the Ukraine has made this the first Parliament since 1955 where living standards have declined. The reality is that most people are feeling poorer than when they last voted in the last General Election nearly five years ago.

The UK also has a smaller workforce than at the start of the Parliament, Florisson adds:

“There are now a record 2.83 million people who are economically inactive due to long-term sickness – 702,000 higher than in January-March 2020. The UK continues to be an international outlier with participation rates well below pre-Covid levels and this trend shows no sign of abating.

The rise in unemployment, and in people neither working nor looking for work (economically inactive) is a sign of 14 years of “abject failure” by the government, says Liz Kendall, Labour’s shadow work and pensions secretary:

“Today’s figures confirm that the Tories have no hiding place after 14 years of abject failure.

On Rishi Sunak’s watch, a record number of people are out of work due to long-term sickness at terrible cost to them, to business and the taxpayer, and we remain the only G7 country whose employment rate still isn’t back to pre-pandemic levels.

Labour’s plan will get Britain working by cutting NHS waiting lists, introducing a new national jobs and careers service, making work pay and supporting people into good jobs across every part of the country.

It’s time to stop the chaos, turn the page and start rebuilding Britain.”

The increase in the UK minimum wage helped to keep wage growth strong in the last quarter.

The national living wage rose by almost 10% at the start of April, to £11.44 an hour, lifting take-home pay for around three million workers.

Yael Selfin, chief economist at KPMG UK, says:

“Wage growth remained elevated in April as the 10% hike in the National Living Wage was enough to temporarily arrest the downward momentum in pay.

Based on today’s release, we estimate that the rise in the National Living Wage boosted the overall level of pay by around 0.1%, although the current headline rate somewhat underestimates the impact because it is reported as a three-month average.

“The unemployment rate ticked up to 4.4%. The recent weakening in demand for staff has been attributed to a lack of roles and firms delaying hiring decisions. This is consistent with a broader trend of retaining existing labour, and could signal that firms expect a pickup in activity so that they could utilise their existing staff more.

Thomas Pugh, economist at audit, tax and consulting firm RSM UK, agrees that the minimum wage increase kept regular pay high:

“The punchy 0.6% m/m increase in private sector regular pay in April was enough to keep headline total pay growth at 5.9%. However, we estimate at least half of this monthly increase was due to the one-off 9.7% increase in the national minimum wage.

Indeed, the labour market continues to loosen with employment dropping by another 139,000 in the three months to April and the unemployment rate rising to 4.4%

The good news for workers is that real wages (ie, after inflation) rose at their fastest rate in almost three years.

Adjusted for CPI inflation, total pay (including bonuses) grew by 2.7% per year in February to April 2024, which is the fastest rate since July to September 2021 (when it was 3.0%).

Regular pay (which excludes bonuses) rose by 2.9%, the fastest growth since June to August 2021 (when it was 3.4%).

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Back when the UK general election was called, today was identified as a key date to take the health of the economy.

That’s because the latest labour market data is being released, the first of five pieces of important economic news which will test Rishi Sunak’s claim that his economic plan was working.

The data will also be watched at the Bank of England, as well as across Westminster, as central bankers look for evidence that inflationary pressures are esing.

And the big news is that unemployment has risen, while wage growth remains stickily high – which may dampen hopes of an early interest rate cut.

The Office for National Statistics has reported that the number of people unemployed rose by 138,000 in the February-April quarter, taking the total to just over 1.5 million.

This lifts the UK unemployment rate to 4.4%, the highest since July-September 2021.

The number of people in work has fallen, by 139,000, to 32.97 million.

And 132,000 more people fell out of the labour market altogether, partly due to ill health, taking the total of economically inactive up to 9.434m. That left the economic inactivity rate at 22.3% for the three months to April, up from 22% in the previous quarter.

The data also shows that companies are cutting back on hiring, with the number of vacancies in March to May 2024 falling by 12,000 to 904,000.

The ONS says:

This month’s figures continue to show signs that the labour market may be cooling, with the number of vacancies still falling and unemployment rising, though earnings growth remains relatively strong.

But wage growth did not slow, despite this cooling demand for workers.

The ONS reports that annual growth in regular earnings (excluding bonuses) was 6.0%, the same as for the previous three-month period; and annual growth in employees’ average total earnings (including bonuses) was 5.9%, the same as for the previous three-month period.

The agenda

• 7am BST: UK labour market statistics

• 11am BST: NFIB index of US small business optimism

• Noon BST: Fireside chat with ECB chief economist Philip Lane at the Banking and Payments Federation Ireland National Conference in Dublin

• 2pm BST: Russia trade balance for April