LIVE MARKETS-A look under the hood of weak UK jobs data

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A LOOK UNDER THE HOOD OF WEAK UK JOBS DATA

UK pay growth slowed sharply and unemployment rose to its highest in nearly four years in the three months to April, news that has sent gilt yields down and bets for more Bank of England rate cuts this year up.

But how do things look under the hood?

While wage growth slowed to 5.2%, from 5.5% in January to March this year, Citi economists point out that excluding the rise in the national living wage, average weekly earnings actually fell by a steeper 0.5% to 4.9%.

Zooming in, they also conclude "public sector hiring continues to mask a meaningful contraction in the private sector."

The UK's unemployment rate also crept up to 4.6%, from 4.5%.

Nevertheless, over at Investec economists highlight some disinflationary greenshoots, one of which is the inactivity rate, down to 21.3% in the three months to April from 21.4% in March. Inactivity has not been lower than this since July 2020, they say.

"...although the recent pattern can be partly explained by a fall in the student population, it is notable that the number of long-term sick now at last appears to be declining, pointing towards improved labour supply."

The data won't move the dial for the BoE next week, they say, with markets expecting no change to Bank Rate, but could strengthen arguments for further cuts in August and pave the way for sequential cuts.

Meanwhile, Zara Nokes, global market analyst at JP Morgan Asset Management says the BoE is in an exceptionally challenging situation despite the clearly deteriorating jobs market.

"with wage growth still-elevated and inflation spiking in April, the Bank will not want to jump the gun and take its foot off the brake too soon."

(Lucy Raitano)

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