Weak UK jobs market holds steady as new PM Burnham takes office
UK Labour Market Trends and Economic Outlook
By Suban Abdulla
Jobs Market Stabilisation Amid Political Change
LONDON, July 21 (Reuters) - Britain's jobs market appears to have stabilised at weak levels with official data showing annual wage growth and unemployment steady in the three months to May and payrolled employment little changed in June despite political turmoil in Westminster.
Average wage growth, excluding bonuses, rose by 3.4% in the three months to May, matching the pace of increase in the three months to April, and the joint-lowest since October 2020, the Office for National Statistics said.
The increase was in line with forecasts in a Reuters poll of economists and is unlikely to add to pressure on the Bank of England to raise interest rates, analysts said.
Britain's unemployment rate was 4.9% in the three months to May, slightly below economists' forecasts for it to rise to 5%. Britain's jobless rate for people aged 16-24 rose to its highest since 2014 at 16.4%.
Political Developments and Economic Policy
Waiting for Clarity on Economic Plans
Andy Burnham became Britain's new prime minister on Monday —capping a campaign that ousted Keir Starmer from Downing Street — and on Tuesday his government announced measures to lower domestic power bills in an attempt to ease the cost of living.
The government is due to announce a 10-year plan for the country later this year.
"The broader picture is one of persistent employer hesitancy. Businesses continue to face cost pressures and are operating in an uncertain environment, now awaiting clarity on the economic direction under new Prime Minister Andy Burnham," said Jack Kennedy, senior economist at jobs platform Indeed.
Private Sector Pay and Inflation Concerns
Tuesday's data showed private sector pay growth, watched by the BoE as it has a more direct impact on prices, was the weakest since 2020 at 2.9% in the three months to May.
The British central bank, which is expected to hold interest rates at 3.75% next week, is closely watching whether the energy price jump caused by the Iran war is turning into longer-term inflation pressures in the economy.
Bank of England in Focus
Interest Rate Outlook
Investors were pricing in one or possibly two 0.25 percentage-point interest rate hikes by the end of 2026.
"Today's data reinforces the case for the Bank of England to keep interest rates on hold, with labour market conditions remaining soft and private sector wage growth continuing to ease," Yael Selfin, chief economist at KPMG, said.
"Private sector wage growth is now running below levels consistent with the Bank's inflation target, providing further evidence that domestic wage pressures are contained."
Recent Economic Data and Labour Market Details
Payroll and Vacancy Trends
Data published last week showed the economy grew slightly in May, reversing a drop in April. Businesses have been concerned about the Middle East conflict and a change of prime minister.
Separate figures, based on tax office data, showed the number of workers on company payrolls fell by 4,000 in June. This data is often heavily revised and the initial rise of 2,000 reported for May was revised up to around 3,000.
Job vacancies in the three months to June fell by 7,000 to 712,000, down from a peak of around 1.3 million in 2022 when the jobs market was the tightest.
Employer Response and Cost Pressures
ONS Director of Economic Statistics Liz McKeown said the drop in vacancies was mainly driven by smaller firms that reduced hiring. Employers have complained about an increase in their social security contributions, introduced by former finance minister Rachel Reeves, that have pushed up costs.
(Reporting by Suban Abdulla; Graphics by Pasit Kongkunakornkul; Editing by William Schomberg and Alison Williams)
