The UK has seen a surprising decrease in its unemployment rate, even as wage growth continues to rise at a slower pace, according to the latest figures released by the Office for National Statistics (ONS).
In the three months leading up to June 2024, wages, excluding bonuses, grew by 5.4%, a slight decrease from the 5.8% growth recorded in the previous month. Despite the deceleration, wages remain strong, though the ONS noted that this level of growth was last observed two years ago. When adjusted for inflation, wages increased by 3.2%, offering some relief to workers amid rising living costs.
A notable trend in the latest data is the continued bucking of the historical pattern where private-sector wage growth outpaces that of the public sector. Public sector pay growth stood at 6%, surpassing the 5.2% increase in private sector wages, highlighting ongoing adjustments in the labour market.
The unemployment rate, which had been forecasted by economists to rise, unexpectedly fell to 4.2% in July, down from the previous month’s 4.4%. This unexpected decline suggests a resilient job market, which could further influence wage dynamics. Economists had anticipated a rise to 4.5%, making the drop all the more surprising.
The decline in unemployment is a positive signal for the UK economy, but it also brings mixed implications for future interest rate decisions. With wage growth still strong, albeit slower, the Bank of England’s Monetary Policy Committee may find itself under pressure to maintain or adjust interest rates. Current market expectations point to a potential hold at 5% in the September meeting, but forthcoming data on economic growth and inflation may alter this outlook.
Meanwhile, the number of economically inactive individuals—those neither in work nor seeking employment—remains elevated at 22.2%, unchanged from recent months but higher than a year ago. The total number of hours worked weekly has increased, reaching 1.06 billion hours from April to June 2024, reflecting the ongoing demands on the UK workforce.
Chancellor Rachel Reeves emphasized the need for continued efforts to support employment: “Today’s figures show there is more to do in supporting people into employment because if you can work, you should work. This will be part of my budget later in the year where I will be making difficult decisions on spending, welfare, and tax to fix the foundations of our economy.”
As the UK navigates these mixed economic signals, the government remains committed to rebuilding the nation’s economy and improving the livelihoods of all its citizens.
