“The latest UK unemployment rate remained unchanged at 5.1%, missing market expectations of 5.0% which signals that the pace of Britain’s recovery is slowing down. The weaker picture of the economy comes despite unemployment sitting at its lowest levels since 2006. Wage growth was in line with market expectations of 1.9%, down slightly from the previous print of 2.0%. Unemployment fell 60,000 between October and December to 1.69 million and employment climbed 205,000 to 31.4 million.
Yesterday’s inflation numbers remain stubbornly low at just 0.3% yoy for the headline print. The core numbers also missed market expectations at -0.8% mom vs -0.7% mom, which has allowed living standards to continue to rise on average. The combination of both weaker employment and inflation sets the precedent and reinforces the view that the Bank of England will not consider increasing interest rates this year – and certainly not before the EU referendum. The sluggish wage growth is likely to be the key reason why the BoE is set to hold on interest rates, which fundamentally shows that the UK economy is not yet robust enough to handle higher rates. With a Brexit vote set to weigh heavily on market activity, Mark Carney’s appetite for an interest rate hike is likely to grow in the latter part of this year at the earliest.”
UK unemployment
Martin Li of CFD and FX broker XTB.com comments: