Unemployment showed an unexpected rise in the UK for the three months to May as the Labor Force Survey measure rose by 15,000 to 1.85 million. The unemployment rate moved up to 5.6% in the three months to May from 5.5% previously, versus expectations it would stay unchanged. This was the first rise in unemployment since December 2013.
The claimant count also rose with 7,000 more people claiming unemployment benefit but the small change meant the claimant rate stayed unchanged at 2.3% in June. There was a fall in the number of people in work, which fell to 30.98 million in the three months to May, while the employment rate fell by 0.1% to 73.3%. This represents a drop of 67,000 from the three months to February, which was mostly due to a fall in the number of part-time workers.
Looking at the change in unemployment in both the claimant count and the labor force survey, the rate of decline over recent months appears to be easing. But it’s too early to judge if this is part of a more permanent slowdown in the jobs market. The earnings data suggests otherwise as pay growth accelerated in May.
Average weekly earnings rose to 3.2% in May from 2.7% in April – the highest figure since April 2010. But this was slightly below estimates of 3.3%. Excluding bonuses, average earnings increased more moderately from 2.7% to 2.8%, much weaker than forecast of 3.0% increase.
The Bank of England, which keeps a close watch on earnings data, is unlikely to be too concerned by today’s weaker-than-expected figures as consumer spending remains healthy and consumers could benefit further from falling inflation and rising earnings. The BoE governor Mark Carney on Tuesday gave the strongest indication yet that the timing of an interest rate rise is moving closer.
The pound fell against the dollar on the release of the data as the spike in unemployment took markets by surprise. Sterling fell to 1.5599 dollars, having earlier peaked at 1.5674 dollars. It was steadier against the yen at around 193 yen. But against the euro, the pound was tracking the dollar. The euro fell to 0.7031 versus the pound in late European trading after a brief rally that saw it move up to 0.7067.
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