What the Numbers Are Really Saying About the UK Labour Market
Unemployment stays stubbornly steady
In the run‑up to year‑end, unemployment slid to 4.4%, just a whisper below the BoE’s 4.5% forecast.
But pause for a reality check
The Office Statistical Office still has a few hiccups in its surveys, so we keep a healthy dose of skepticism.
Pay bumps up a notch
- Regular pay surged 5.9 % YoY – the fastest pace since April of last year.
- When bonuses are added, overall pay climbs to 6.0 % growth – the quickest upturn since November 2023.
Those numbers? Not exactly the parents’ dream of a steady march back to the 2 % inflation target.
The Bank’s Reply
The newly released data won’t sway the Bank’s decision.
- Policy makers still keep the brakes on, wary of data quality gaps.
- Yet the risk outlook leans hard toward a downturn – UK businesses are tightening belts as the National Insurance hike looms in April.
What’s the forecast for rates?
In “normal” times, the MPC might trim rates to cushion the slump. Now? That’s a harder sell.
- Sticky inflation, upcoming CPI stats, and strong wage growth mean the “Old Lady” will probably keep nudging rates down in 25‑bp steps each quarter.
- The next rate cut is slated for May.
Only if the job market fizzles and demand slumps might we see a rapid disinflation burst—more like a movie plot than the current reality.
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