Surprise fall in unemployment rate as wage growth slows down
Wage growth remains high – though pay is rising at the slowest rate in two years.
Wages are still rising but at a slower pace as the unemployment rate surprisingly fell, according to official figures.
Pay, excluding bonuses, grew by 5.4% in the three months to June, less than the 5.8% experienced a month before, data from the Office for National Statistics (ONS) showed.
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While strong, the figure was last this low two years ago, the ONS said.
When price rises (measured by inflation) are factored in, wages rose 3.2%, the figures showed.
The long-running trend of private-sector wage growth being above public-sector increases continued to be bucked.
Public sector pay growth was 6%, while private sector wages were up 5.2%.
What’s happening with unemployment?
The percentage of people who are out of work and looking for a job dropped to 4.2% in July, the ONS said.
A rise had been forecast by economists. Those polled by news agency Reuters expected a rise to 4.5%, up from the 4.4% recorded a month ago.
A low unemployment rate can indicate a healthy economy and increase pressure for wages to rise.
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Mixed messages for interest rates
Such strong wage growth was anticipated by economists, likely meaning no major changes in the expected path for interest rate-setters at the Bank of England.
High interest rates mean more expensive borrowing.
Markets currently expect the interest rate to be kept at 5% when the Monetary Policy Committee next meets in September but data on economic growth and inflation released in the coming days may change that.
The ONS, however, warned against reading too much into its own labour market figures as they are liable to revision.
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People neither in nor looking for work
The number of people out of work and not looking for a job remained higher than a year ago at 22.2% but at roughly the same level as the last three months.
These people are described as being economically inactive.
The total number of hours worked a week is higher than last year having reached 1.06 billion hours from April to June 2024.
“Today’s figures show there is more to do in supporting people into employment because if you can work, you should work,” Chancellor Rachel Reeves said.
“This will be part of my budget later in the year where I will be making difficult decisions on spending, welfare and tax to fix the foundations of our economy so we can rebuild Britain and make every part of our country better off.”
