The unemployment rate of the United Kingdom has reached a four-year summit, in a surprise deterioration which increases the case of a decrease in interest rates of the Bank of England.
The Office for National Statistics (ONS) declared an increase in the unemployment rate of 4.6% to 4.7% in the three months to May.
No change had been expected after the increase in the percentage point of 0.1 given last month.
ONS data, which is still accompanied by a health warning due to poor participation rate, have also shown a reduction in the pace of wages of wages, with average weekly income increasing by 5%. It was down compared to 5.2% reported a month ago.
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ONS economic statistics director Liz McKewn said about her conclusions: “The labor market continues to weaken, the number of employees on paying payroll, although revised tax data show that the drop in last months is less pronounced than expected.
“Wages growth has dropped both in cash and in real terms, but the two measures remain relatively strong compared to historical standards.
“The number of vacancies is still down and has now been down continuously for three years.”
Data was published 24 hours after a surprise in the rate of inflationAt 3.6%was revealed by the ons.
It was considered to blur the waters while the bank considers the moment of its next drop in interest rate.
But a quarter -point reduction, at 4%, is widely awaited at the next meeting of the rate establishment committee in early August,
The bank, according to experts, will spend beyond the figures in the inflation of the titles and will see the scope of introducing the third reduction of the year due to the softening of the labor market observed in 2025 – a factor that the governor of the bank, Andrew Bailey, had suggested would be more concentrated in a recent interview with Times.
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What does “inflation increase” mean?
Lower wage rewards remain a compulsory element to reduce borrowing costs, as there are fears that the difficulties of the United Kingdom to reduce inflation will be partly linked to the growth of pricing increases since August 2023.
Add the slowdown in economic growth And you have a bank that apparently tackles the effects of so-called stagflation-as a weak growth scenario with inflation constantly well above the 2% target of the bank.
Although there are contradictory forces at stake for the deliberations of the bank’s interest rates, the increase in inflation, coupled to weaken growth and to employment data, are not welcome for a chancellor under increasing pressure.
Rachel Reeves was accused on Wednesday of having contributed to inflation thanks to employment taxes deployed from April – organizations in the grocery sector saying that an element of increase in price growth growth was reduced to companies that transmit these additional costs, as well as the increases in minimum remuneration requirements.
At the same time, these budgetary measures have clearly retained hiring since spring.
Frasers Group, the best known retail company for its Direct Sports brand, said in parallel with its results today that it was struggling with 50 million pounds sterling of budget costs and turning to AI with the aim of “efficiency” to compensate for part of this bill.
A comfortable crumb for Ms. Reeves is that the prospect of a drop in rate next month remains – with any reduction helping to reduce the cost of government debt, because the room of the space it has in public finances remains under high pressure.
Government towers on winter fuel payment edges and social protection reforms supported its tax rules, leaving it probably to cover the fall budget to cover gaps, either thanks to new tax increases, or to discounts of expenses.
Yael Selin, chief economist of KPMG UK, said about the prospects for lower rates: “The slowdown in activity on the labor market, associated with the relaxation of salary pressures, will probably encourage the Bank of England to reduce interest rates next month.
“The impact of tax and administrative changes in April led to a marked slowdown in hiring activity among companies. The remaining interior activity remaining slow, the MPC will probably want to provide support via a more loose policy to prevent greater deterioration on the labor market. ”