Are interest rates still heading ‘downwards’ as the Bank of England Governor Andrew Bailey said last week? Homeowners across the country will be hoping so as average two-year mortgages are again approaching 6 per cent.
But the latest figures on the UK job market may dampen hopes of a cut coming soon. Britons have continued to receive above inflation pay rises. Figures just released by the Office for National Statistics show that – against expectations – pay growth in cash terms is at 5.7 per cent. Even when you factor in inflation, pay is still going up and has now hit 1.7 per cent – the highest in two years.
More timely figures from HMRC’s PAYE data show April pay jumping 6.9 per cent – though this was largely an effect of the increase in the national living wage. Those pay rises were most keenly felt in the accommodation and food services sector where workers saw pay bumps of over 9 per cent.
These March figures cover a crucial month where many employees have their pay reviewed so the unexpected wage rises will concern Bank of England rate setters who have said they are looking for pay growth to slow substantially before they begin to cut rates. At the end of last week markets were expecting the first such cut to come in June and the Bank's governor Andrew Bailey said interest rates were heading on a 'downwards' path. This morning’s wage figures may change that.
In the jobs data though, also released this morning, there were signs that the heat is finally coming out of the labour market. Unemployment rose to 4.3 per cent while the number of payrolled employees fell by 5,000 between February and March. The fall in employment is quite sharp too, with 178,000 workers leaving their jobs over the three months covered by the figures. Vacancies in the economy also fell for the twenty-second consecutive period with the number of jobseekers per job hitting 1.6, up from 1.4.
Meanwhile, those out of work and not looking for a job continued to rise. A further 104,000 people became economically inactive in the three months to March – equivalent to the entire city of Lincoln giving up on work. Since the first lockdown that number has now grown by over 830,000 to just under 9.4 million.
The ONS says the recent increases in inactivity were driven by long-term sickness which remains at a near-record high of 9.8 million. An increase in student numbers also contributed to the year-on-year rise of those abandoning the labour market.
The claimant count – a measure of those on unemployment benefits – also increased by nearly 9,000 in the month to April and is now over 29,000 higher than a year ago. We'll have a clearer picture later this morning as the DWP will slip out the latest figures on out of work benefits. You can track this on The Spectator's data hub.
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