Key insights
- UK labor market data shows a slightly cooler market than expected, with earnings growth easing less than forecast and the jobless rate unexpectedly falling due to increased student inactivity. The BoE is closely monitoring wages for inflation pressure, with policymakers divided on the labor market's impact on inflation expectations. This data could influence the BoE's upcoming rate decision, potentially leading to tighter monetary policy and a slight negative impact on global equities.
April 21 (Reuters) - Britain’s labour market cooled only slightly in three months to February with earnings growth easing by less than forecast and the jobless rate falling unexpectedly although that drop reflected rising numbers of students not looking for work rather than rising employment.
Average weekly earnings, excluding bonuses, fell to 3.6% in annual terms over the three months to February from 3.8% in the three months to January, the Office for National Statistics said on Tuesday.
Economists polled by Reuters had mostly expected regular average weekly earnings growth of 3.5%.
The Bank of England is watching wages data carefully as it gauges inflation pressure in Britain’s economy which investors view as highly vulnerable to the jump in energy prices caused by the war in Iran.
Economists said they were surprised by a drop in the unemployment rate to 4.9% from 5.2%. The Reuters poll had pointed to no change.
The ONS said the fall reflected a 169,000 increase in people considered to be inactive - or out of work and no looking for a job - over the three months to February, with employment also rising by 24,000.
Rising numbers of students who are not looking for work accounted for more than three-quarters of the shift into inactivity among 16-64 year-olds, the data showed.
BoE policymakers take different views over how much the weakness in the labour market will help to neutralise rising expectations of inflation among consumers.
BoE Governor Andrew Bailey said the central bank should keep a clear eye on risks to growth and jobs as well as inflation when making their next decision on rates.
The central bank’s chief economist Huw Pill has emphasised that keeping inflation under control is the BoE’s primary goal, and has criticised his colleagues "wait-and-see" messaging.