- Surprising Rise in Unemployment: UK Unemployment Rate Increases to 4.2%, Defying Economist Predictions
- Private Sector Wages Outpace Inflation: Private Sector Wage Growth Reaches 8.2%, Exceeding Inflation Measure
- Pressure on Bank of England: Rising Wages Push for Continued Interest Rate Hikes, Expected Peak at 6%
In the three months leading up to June, the rate of unemployment in the United Kingdom increased beyond what economists had predicted.
Despite a surprising increase in the UK unemployment rate, private sector wages and total pay, including bonuses, surpassed inflation.
Economists predicted that the unemployment rate would remain unchanged from the previous month’s level of 4%, but it has increased to 4.2% as the number of job openings has decreased by 66,000 to 1.02 million.
Additionally, private sector wage growth has increased to 8.2%, exceeding a key measure of inflation. Since September 2021, private sector salaries have not exceeded inflation for nearly two years.
In addition, pay, including bonuses, increased by 8.2%, the largest annual increase outside of the COVID pandemic as a result of the NHS one-time bonus.
During the three months to June, average weekly earnings, excluding bonuses, grew at an annual rate of 7.8%, surpassing the previous record of 7.3%, which was validated in last month’s report.
The growth was, however, outpaced by the rate of price increases, resulting in a wage cut for employees.
In June, the main measure of inflation (the consumer price index) stood at 7.9%. Since October 2021, wage growth has lagged behind inflation.
The public sector wage growth was the greatest from September to November 2001, when it was 5.7%.
Some industries saw even greater growth.
The finance and business services sector had the highest annual wage growth rate of 9.4%, followed by the manufacturing sector at 8.2%; this is the sector’s highest annual wage growth rate since analogous records began in 2001.
The governor of the Bank of England, who has been endeavoring to reduce inflation to 2% through 14 consecutive interest rate hikes, deemed wage increases “unsustainable.”
Regarding wages, Mr. Bailey has stated that they are “currently inconsistent with the 2% target because we are not at the 2% target.”
“It will need to be removed.”
The most recent data will put pressure on the Bank to continue its rate-hiking program, making borrowing more costly. Thus, the market now expects interest rates to peak at 6%, up from 5.75 percent before data publication.
The ONS also reported that in June, 160,000 working days were lost due to industrial action. More than fifty percent of days were lost due to strikes in the health and social work sectors. Junior physicians staged a walkout this month.
Chancellor Jeremy Hunt said, Our labour market effort has led to a record number of employment.
“Our ambitious reforms will make work pay and help even more people enter the workforce – including by expanding free child care next year – contributing to the achievement of our economic growth objective.”
