The jobless rate climbed for the first time in Britain since late 2020 and there was a cooling in other measures of the hot labor market in the country. This is likely to ease the inflation concerns that the Bank of England (BoE) may have, which is scheduled to raise interest rates in the country in a meeting this week.
Jobless Rates Go Up
The recovery of the British economy because of the coronavirus pandemic had been weighed down significantly because of surging inflation. This became evident with the jobless data, which highlighted that in the last three months to April, the rate had climbed up to 3.8%. The previous report from the labor market for the three months ending in March had the rate at 3.7%.
The last time this rate had gone up was back in 2020 in the last three months of the year. Economists had expected that Britain’s unemployment rate would actually decline to 3.6%, but it had done the opposite. This rise was partly because of a fall in the economic activity rate applicable to adults of working age. This takes into account people who do not show up as unemployed because they are no longer part of the labor market.
During the period from February to April, it had declined by 0.1% to reach 21.3%, primarily because students had been looking for work. Economists said that the labor market just might see a turnaround because the uncertainty may push employers to hit the brakes. Even though there was slow growth in vacancies, they still hit a new high. Likewise, the inactivity rate may have declined, but it was still above the levels it had reached during the pandemic era, which means that the job market is quite tight.
Impacts of The Jobless Rate
After the release of the data, the British pound fell against the US dollar and there was also an easing off recorded in British government bond yields with shorter maturity. They had previously hit multi-year highs, but investors lowered their expectations about the hike in the interest rates from the Bank of England (BoE).
On Thursday, the central bank is scheduled for a policy meeting in which it will definitely increase the interest rates in order to quell the surge in inflation. This is essential to do in order to ensure it does not turn out to be a problem in the long-term if employers decide to up wages in order to fill vacancies. On Monday, data showed that the British economy shrunk back in April, which hints of a slowdown in the economy.
In the three months ending in April, about 177,000 people had been employed, while the forecast had been of 105,000. There was a fall in number of unemployed people by 47,000. The jobless rate in April had climbed 4.2% and employment had fallen by 254,000. Back in March, the jobless rate had been about 3.5%. The data on Tuesday showed that regular pay had grown slightly to reach 4.2%, despite expectations of a slowdown.