London Daily

Focus on the big picture.
Saturday, May 31, 2025

A rising unemployment rate gives further hope interest rate rises will now be paused

A rising unemployment rate gives further hope interest rate rises will now be paused

The latest employment data gives further reason to hope that the Bank of England can sit back for a while.
After more than a year of sluggish growth, high inflation and rising interest rates, the unemployment rate is now rising.

Another 60,000 people flowed into unemployment in the three months to March, taking the headline unemployment rate to 3.9%. This was up from 3.8% in February and higher than expected.

Economists have long warned that a surge in unemployment is looming but, at 3.9%, unemployment is still low by historic standards and the labour market is tight.

That goes some way towards explaining why wages are increasing at a robust pace.

Regular wages, excluding bonuses, grew by 6.7% between January and March (compared to the same period last year).

This was up from 6.6% and was driven by a big surge in public sector pay as the government struck deals with striking unions.

More than half a million working days were lost to strikes in March and, in the three months to March, public sector pay jumped by 5.6%, the biggest leap since 2003.

Although workers are securing chunky pay rises wage growth is still lagging inflation, which is in double digits.

So, wages are rising too slowly to maintain our living standards but they're rising too quickly for the Bank of England, which fears wage growth could be fuelling inflation.

It is keeping a particularly close eye on pay in the private sector, which has a bigger impact on inflation.

Here, wages grew by 7% during the quarter. This is still uncomfortably high but it has come down from 7.3% during the previous quarter. This will give the Bank of England some breathing room.

Samuel Tombs, economist at Pantheon Macroeconomics, said the figure was in line with the Bank's own forecasts.

"Wage growth is slowing rapidly enough for the monetary policy committee (MPC) to keep Bank Rate at 4.50% at its next meeting on June 22."

The labour market will most likely continue to deteriorate over the coming year as the number of people looking to take on extra work rises faster than demand for workers.

It means the unemployment rate could hit 4.25% by the end of the year. This the "equilibrium" rate that the Bank of England deems necessary to prevent the economy from overheating and inflation from rising.

"We expect these trends to continue over the coming months, and for the number of people out of the labour force due to young children also declining next year, when the government will increase childcare funding," Mr Tombs said.
Newsletter

Related Articles

0:00
0:00
Close
Satirical Sketch Sparks Political Spouse Feud in South Korea
Indonesia Quarry Collapse Leaves Multiple Dead and Missing
South Korean Election Video Pulled Amid Misogyny Outcry
Asian Economies Shift Away from US Dollar Amid Trade Tensions
Netflix Investigates Allegations of On-Set Mistreatment in K-Drama Production
US Defence Chief Reaffirms Strong Ties with Singapore Amid Regional Tensions
Vietnam Faces Strategic Dilemma Over China's Mekong River Projects
Malaysia's First AI Preacher Sparks Debate on Islamic Principles
White House Press Secretary Criticizes Harvard Funding, Advocates for Vocational Training
France to Implement Nationwide Smoking Ban in Outdoor Spaces Frequented by Children
Meta and Anduril Collaborate on AI-Driven Military Augmented Reality Systems
Russia's Fossil Fuel Revenues Approach €900 Billion Since Ukraine Invasion
U.S. Justice Department Reduces American Bar Association's Role in Judicial Nominations
U.S. Department of Energy Unveils 'Doudna' Supercomputer to Advance AI Research
U.S. SEC Dismisses Lawsuit Against Binance Amid Regulatory Shift
Alcohol Industry Faces Increased Scrutiny Amid Health Concerns
Italy Faces Population Decline Amid Youth Emigration
U.S. Goods Imports Plunge Nearly 20% Amid Tariff Disruptions
OpenAI Faces Competition from Cheaper AI Rivals
Foreign Tax Provision in U.S. Budget Bill Alarms Investors
Trump Accuses China of Violating Trade Agreement
Gerry Adams Wins Libel Case Against BBC
Russia Accuses Serbia of Supplying Arms to Ukraine
EU Central Bank Pushes to Replace US Dollar with Euro as World’s Main Currency
Chinese Woman Dies After Being Forced to Visit Bank Despite Critical Illness
President Trump Grants Full Pardons to Reality TV Stars Todd and Julie Chrisley
Texas Enacts App Store Accountability Act Mandating Age Verification
U.S. Health Secretary Ends Select COVID-19 Vaccine Recommendations
Vatican Calls for Sustainable Tourism in 2025 Message
Trump Warns Putin Is 'Playing with Fire' Amid Escalating Ukraine Conflict
India and Pakistan Engage Trump-Linked Lobbyists to Influence U.S. Policy
U.S. Halts New Student Visa Interviews Amid Enhanced Security Measures
Trump Administration Cancels $100 Million in Federal Contracts with Harvard
SpaceX Starship Test Flight Ends in Failure, Mars Mission Timeline Uncertain
King Charles Affirms Canadian Sovereignty Amid U.S. Statehood Pressure
Trump Threatens 25% Tariff on iPhones Amid Dispute with Apple CEO
Putin's Helicopter Reportedly Targeted by Ukrainian Drones
Liverpool Car Ramming Incident Leaves Multiple Injured
Australia Faces Immigration Debate Following Labor Party Victory
Iranian Revolutionary Guard Founder Warns Against Trusting Regime in Nuclear Talks
Macron Dismisses Viral Video of Wife's Gesture as Playful Banter
Cleveland Clinic Study Questions Effectiveness of Recent Flu Vaccine
Netanyahu Accuses Starmer of Siding with Hamas
Junior Doctors Threaten Strike Over 4% Pay Offer
Labour MPs Urge Chancellor to Tax Wealthy Over Cutting Welfare
Publication of UK Child Poverty Strategy Delayed Until Autumn
France Detains UK Fishing Vessel Amid Post-Brexit Tensions
Calls Grow to Resume Syrian Asylum Claims in UK
Nigel Farage Pledges to Reinstate Winter Fuel Payments
Boris and Carrie Johnson Welcome Daughter Poppy
×