UK Labor Market Tightens Further

The UK labor market tightened further as unemployment declined in three months to February, average pay increased and job vacancies rose to a record high, official data revealed on Tuesday.

The jobless rate fell 0.2 percent points from the previous quarter to 3.8 percent in three months to February, the Office for National Statistics said. The rate came in line with expectations.

Moreover, the unemployment rate was 0.1 percentage points below pre-coronavirus pandemic levels.

At the same time, the employment rate was largely unchanged at 75.5 percent, but remained below the pre-pandemic level.

The number of job vacancies rose to a new record 1,288,000 in January to March period. However, the rate of growth in vacancies continued to slow down.

In March, payrolled employment showed a small monthly growth of 35,000 to a record 29.6 million, data showed.

Average earnings including bonuses, grew 5.4 percent annually in three months to February. Excluding bonus, average earnings was up 4.0 percent. Both rates matched economists’ expectations.

With CPI inflation at a 30-year high of 6.2 percent, though, this was not enough to stop real wages from falling again by 1.6 percent, Ruth Gregory and Nicholas Farr, economists at Capital Economics, said.

They will only fall further to -3.4 percent as CPI inflation rises to a peak of 8.3 percent in April, economists added.

The part of the recent tightness is borne out of the jobs market coming out of an unusually dormant phase, James Smith, an ING economist, said.

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