The UK’s unemployment rate has remained steadfast at 4.9% during the three months to the end of May, according to data from the Office for National Statistics published today (21 July).
While this is a 0.2 percentage-point increase over the year, it signifies a 0.1 percentage-point fall compared to the last quarter.
Elsewhere, the UK economic inactivity rate fell by 0.1 percentage points over the year and 0.1% over the quarter, residing at 20.9%.
The number of payrolled employees fell by 0.3%, or 90,000, over the last 12 months to the end of May, and by 0.1% (30,000) over the quarter. The UK’s claimant count for June this year, however, increased over the month but has fallen over the past year to approximately 1.689 million.
Wages grew by an average of 3.4% excluding bonuses, and 4.3% including bonuses, over the three-month period. Earnings growth excluding bonuses reached 5.5% over the year for the public sector, and 2.9% for the private sector.
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Neil Birrell, CIO of Premier Miton, said the jobs market has been “relatively unaffected by the overhanging political uncertainty”.
“It’s fair to say that the UK economy is holding up reasonably well given the uncertainty; of which, hopefully, we will see some lifted in the coming days.
“If so, that would allow businesses to plan ahead; however, while the economy might he holding up, it’s certainly not racing away. That would require major changes to outlook and policy.”
Susannah Streeter, chief investment strategist at Wealth Club, said that while the UK labour market has proven more resilient than expected, it highlights “the difficult inheritance facing the new government”, following Andy Burnham’s official appointment as UK prime minister yesterday (20 July).
“While unemployment has edged slightly lower compared with the previous quarter, suggesting employers are hanging on to staff, the rise in the claimant count underlines that many families continue to feel the squeeze,” she warned.
“Employment has largely stalled and economic inactivity remains stubbornly elevated, pointing to an economy that’s proving a little more resilient than expected but still sluggish.”
However, economic resilience could prove challenging in itself for Prime Minister Burnham, Streeter pointed out, as higher-for-longer borrowing costs will make the task of repairing public finances “more challenging”.
‘Little time for a honeymoon period’
Jonathan Raymond, investment manager at Quilter Cheviot, concurred that Burnham will have “little time for a honeymoon period”, with today’s figures proving to be “just one of the many challenges sat waiting for him in his in-tray”.
“Regular earnings growth remained at 3.4%, suggesting that although hiring conditions are softening, wage pressures have yet to fade,” he explained.
“That leaves the Bank of England in a familiar bind. A weaker jobs market would typically strengthen the case for lower interest rates, but with inflation data due tomorrow and expectations that price pressures may edge higher, policymakers are unlikely to want to move too aggressively.”
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Danni Hewson, head of financial analysis at AJ Bell, agreed that Burnham faces “huge challenges”, but added that unemployment levels among 18-24 year olds “must rank near the top” – a figure that has been overshadowed by the wider numbers.
“Speak to businesses up and down the country, and they will tell you that under the previous administration, hurdles were put in place that made it harder to take a chance on bringing younger workers into the fold,” she said.
“Concerns about changes to employment rights coupled with increased costs made many companies more cautious about taking chances on new but unproven workers.”
More broadly, she argued the unemployment rate is still 70 percentage points higher than when Keir Starmer became Prime Minister, which “will undoubtedly have been impacted by events both foreign and domestic”.
“But if the new PM is going to accomplish all the things he has said he wants to do, particularly if he wants to foster hope, making the jobs market work for everyone must be a priority.”
