Forex Trading Library

UK real wages slip as unemployment rate hits a 12 year low

1 331

The April unemployment data from the UK posted a new record in April as the nation’s unemployment rate fell to 4.6% marking a 12 year. The unemployment rate slipped from 4.7% in the Dec – Jan period.

Despite the blockbuster headline, regular earnings fell 0.2%, three months to the year, compared to a 0.1% increase in the Dec – Feb period suggesting that earnings growth might have stagnated including inflation-adjusted earnings posting a decline.

On a monthly basis, the UK’s unemployment rate was seen at 4.3%, which the lowest since record keeping began in the UK. The decline in the unemployment rate clearly failed to translate to higher earnings growth which has become a factor as policy makers at the Bank of England contemplate on the next policy move.

Data from the UK’s Office for National Statistics (ONS) showed that average weekly earnings which excluded bonuses increase 2.1% in the first quarter. It was slightly below the 2.2% gain seen previously.

With the UK’s inflation rate rise to 2.3% in March, real wages for the period was seen declining by 0.2 percentage points during the quarter ending March.

In March alone, real wages were seen falling by 0.2% in the quarter.

When accounting for bonuses, earnings rose 2.4% at an annual rate in the three months to March. This put the real wage growth at 0.1% during the quarter including bonuses. It was the lowest level since October of 2014.

UK Inflation and wage growth
UK Inflation and wage growth

Employment in the UK rose by 122k to 31.95 million which pushed the employment rate to 74.8% in the quarter, up from 74.6% previously. It was the highest on record.

UK consumer price index, highest since 2013

Earlier in the week, consumer price index data from the UK showed that inflation accelerated from 2.3% in March to 2.7% in April.

The jump in consumer prices came with an increase in air fares boosting prices during the Easter week’s travel period. Inflation input, however, was seen declining after posting record highs earlier this year.

Volatility Ahead: UK Inflation & GBP Outlook

Airfares alone rose 18.3% on a month over month basis in April leading to a 6.8% annual gain. The price of utilities rose just 0.06%, which was muted despite energy prices rising 2.5% in April on account of new energy tariffs. This was partly due to pre-payments, the ONS said.

The inflation rate of 2.7% in April matched the Bank of England’s forecast of 2.7% annual rise, as mentioned in the May quarterly inflation report. Following the April inflation data, consumer prices in the UK are now above the BoE’s 2% inflation target rate for a third consecutive month.

UK retail sales bounces back

Retail sales numbers were also encouraging as data showed that in April, consumer spending in terms of volume rose 2.3% on a month over month basis. This was the fastest pace of growth since January 2016 and reversed the 1.4% decline from March.

Excluding auto fuel, retail sales jumped 2%, higher than the decline of 1.2% posted a month ago. The latest figures put the year over year retail sales to 4% in April, rising from 2% in March.

Retail sales figures were expected to post a modest rebound but the markets at large were expecting to see a weak trend persist. The major reasoning behind the thought being that consumers were likely to hold back on spending amid rising consumer price and weaker pace of wage growth.

Clearly, that wasn’t the case, at least for the month of April. Following the release, the British pound finally managed to break past the $1.3000 handle, rising to an 8-month high.

Leave A Reply

Your email address will not be published.