UK Unemployment Rate Rises To 4.4%; Wage Growth Up 2.5%

UK Unemployment Rate Rises To 4.4%; Wage Growth Up 2.5%

The increase represents the first time since 2016 that the unemployment rate has risen and it is the sharpest increase in almost five years.

British government bond prices rose and sterling briefly fell against the US dollar after Wednesday's figures showed the sharpest rise in the number of people out of work in nearly five years.

There was also a better-than-expected rise in wages, although it still trails behind inflation, which stood at 3 percent in December, 2017. "This change is within the LFS error margin".

But the Bank of England expects pay to pick up soon, a big reason it says interest rates are likely to rise faster and to a greater extent than it thought until recently.

However, the claimant count fell by 7,200 last month to 823,000, said the Office for National Statistics.

Average weekly earnings excluding bonuses rose 2.5 percent from a year earlier, the most since December 2016, the Office for National Statistics said on Wednesday.

The number of people classed as economically inactive, including students, those on long-term sick leave, taken early retirement or who have given up looking for work, fell by 109,000 to 8.7 million, giving a rate of 21%.

At the same time, the employment rate rose to 75.2% from 74.6% a year ago.

Unemployment over the three months came in at 4.4%, up on the 4.3% in last month's readings, but it's down from 4.8% in the previous year.

ONS data shows average wages increased more than expected over the same period, climbing by 2.5%. In midday trading, the pound was 0.5 percent lower at $1.3921.

Still, wage increases are lagging price rises, meaning household incomes remain stretched as the country enters a crucial stage in Brexit discussions.

"Rising employment this past year was largely driven by United Kingdom nationals" as fewer eastern Europeans and non-EU nationals were working than a year earlier, ONS statistician Matt Hughes said. The number of Eastern European workers fell.

John Hawksworth, chief economist at PwC, said the unexpected rise "is not a sign of labour market weakness" because there was a "healthy rise in total employment".

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