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The UK’s unemployment rate rose to four-year highs, leading to a sharp rise in pay taxes in April and a sharp rise in minimum wages that cooled wage growth, highlighting expanding stocks in the labour market.
Employers cut the number of payroll staff by 55,000 between March and April, the National Bureau of Statistics said Tuesday, leaving a 0.4 percent lower number than in April 2024.
Further signs of slowing the job market have seen an increase in the number of vacant rooms and the number of people claiming the benefits of unemployment. Provisional figures for May, likely to be revised upwards, showed a 115,000 salary decline.
The corporation is working on higher national insurance contributions introduced in Prime Minister Rachel Reeves’ October budget and rising minimum wages. Both measures came into effect in April.
“The cooling in the UK job market is gathering a pace,” ING analysts said. “Wage growth is also slowing down.”
Unemployment, measured by the ONS Workforce Survey, was a four-year high in line with economists’ expectations, up from 4.5% in the three months leading up to March.
The annual growth in average weekly wages, excluding bonuses, slowed to 5.2% of the period, ONS said. This was below expectations of analysts from 5.5% to 5.3% in the three months leading up to March. The increase in total revenue, including bonuses, was 5.3%.
After the data was released, traders increased their bet that the Bank of England’s Monetary Policy Committee would cut interest rates by quarter points at its September meeting compared to previous expectations in November.
The pound fell 0.6% to $1.346, but the two-year gold leaf yield, which is sensitive to interest rate expectations, fell 0.06 percentage points to 3.95%.
The MPC split three methods last month, cutting interest rates by a quarter point to 4.25%, with two staff members voted for a bigger cut, and two people chose not to change interest rates.
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The economist said Tuesday’s data reassures policymakers that fundamental inflation pressures in the economy are being eased despite a sharp pickup of headline inflation in April.
“The job market hasn’t collapsed, but most indicators show that labor demand is clearly weakening,” said Ruth Gregory of Consultancy Capital Economics.
The figures do not necessarily encourage rate cuts at the next MPC meeting, but supported the incident in which it cuts fees as low as 3.5% from next year, she added.
Rob Wood at consulting firm Pantheon Macroeconomics said the labor market “looks worse in May,” but warned that payroll numbers could exaggerate the degree of weakness, as they did not include the number of self-employed people.
Additional Reports by Ian Smith of London
