A still-tight labour market intensifies pressure for further hikes from the BoE

Today’s UK data revealed a still-tight labour market thanks to evidence showing another drop in the unemployment rate and an acceleration in nominal wage growth. This will increase concerns that the Bank of England will hike interest rates again in the coming weeks in order to quell inflationary pressures.

Noteworthy details of the report were as follows-

• The unemployment rate decreased from 3.9% in the three months to March to 3.8% in the three months to April, defying UK economists’ expectations for an increase to 4.0%.

• The employment rate exhibited positive growth, reaching 76% in the latest quarter compared to 75.9% in the previous three months. That increase propelled the number of people employed to a new record high, surpassing pre-pandemic levels for the first time.

• The estimated number of job vacancies fell by 79k on a quarterly basis, resulting in a total of 1051K vacancies. This marks the 11th consecutive period with a decrease in vacancies.

• As for wages, both average total pay (including bonuses) and regular pay exceeded economists’ predictions. Average total pay saw growth of 6.5% in the three months to April, while regular pay saw a larger climb of 7.2%. That said, real wage growth, (i.e. adjusted for inflation) continued to lag behind and fell by 2.0%y/y.

• The economic inactivity rate fell by 0.4 percentage points to 21.0% in the three months to April. That decline was largely driven by those inactive for other reasons and those looking after family or home. Meanwhile, those inactive because of long-term sickness increased to a record high.