The UK labour market showed continued resilience in May, with employment rising, unemployment remaining unchanged and wage growth continuing to ease, reinforcing expectations that the Bank of England will keep interest rates on hold.
The latest figures showed payroll employment increased by 2,000 during May, outperforming expectations of a 23,000 decline and following an upward revision to April’s figures. Labour Force Survey employment also rose by 100,000 over the three months to April, ahead of market forecasts, while the unemployment rate remained at 4.9%.
Private sector regular pay growth slowed to 2.9% in the three months to April, down from 3.1% previously and in line with expectations. Vacancies edged lower to 707,000 from 709,000, while redundancies fell to their lowest level since August last year, pointing to a labour market that continues to soften only gradually.
Commenting on the figures, Rob Wood, chief UK economist said the data offered little justification for the Monetary Policy Committee to accelerate interest rate cuts despite recent geopolitical uncertainty.
He said: “The labour market was easing only gradually, if at all, three months into the US-Iran war, giving the MPC little reason to pivot back to rate cutting even if oil prices eventually return to their previous levels. Job growth looks more stable after payrolls revisions and a small consensus-beating rise in April, the unemployment rate dipped back to 4.9%. The MPC certainly won’t hike later today, while a July increase is off the table. But caution will have to be the watchword.”
The analysis noted that although official wage data continued to moderate, other measures of pay growth remained elevated, suggesting underlying labour market conditions are stronger than the headline earnings figures imply. It also highlighted that vacancies have remained broadly stable over recent months, although early redundancy notifications have risen since early May and will be monitored as a potential leading indicator of a softer jobs market.
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