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FX.co ★ UK Unemployment Rate Falls Unexpectedly

UK Unemployment Rate Falls Unexpectedly

Despite restrictions related to the coronavirus pandemic, the UK unemployment rate dropped unexpectedly in the three months to February as the government continues its job furlough scheme.

The jobless rate fell to 4.9 percent in three months to February, data from the Office for National Statistics showed on Tuesday. Economists had forecast the rate to rise to 5.1 percent from 5 percent in three months to January.

An estimated 1.67 million people were unemployed, down 50,000 on the quarter. This was the first quarterly decrease since October to December 2019.

At the same time, the employment rate dropped 0.1 percentage points from the previous quarter to 75.1 percent.

Employment may be closer to a trough than most people realize, Thomas Pugh, an economist at Capital Economics, said.

Even though a rise in the unemployment rate is expected, the bulk of that will be driven by those who left the labor force returning, rather than people losing their jobs, the economist said.

James Smith, an ING economist said, he still expects it to take some time for employment to totally recover, and it is worth remembering that the upheaval caused by the new EU-UK relationship will also add pressure over time.

But barring any more Covid surprises, it is possible that the jobless rate will gradually fall again by the end of the year, the economist noted.

Annual growth in average employee pay continued to strengthen, the growth was driven in part by compositional effects of a fall in the number and proportion of lower-paid employee jobs.

In three months to February, average earnings including bonus grew 4.5 percent annually, slower than the expected growth of 4.8 percent. Meanwhile, excluding bonus, earnings advanced 4.4 percent, which was bigger than the forecast of 4.2 percent.

In March, the claimant count rate held steady at 7.3 percent. The number of people claiming unemployment benefits increased by 10,100 from February.

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