This morning’s UK labour market report reiterated the upward trend in unemployment.
Joblessness has risen to 4.2%, it’s highest level since last summer, however now-typical caveats around data quality concerns amid ongoing ONS data collection issues must continue to apply.
In any case, despite the unexpectedly large rise in unemployment, the headline rate remains below the MPC’s February forecast of 4.4% in the first quarter of this year.
However, of much more interest to the BoE will be the relatively sluggish pace of cooling earnings growth, with overall earnings increasing at 5.6% YoY for the second straight month, while regular pay growth remains north of 6%.
This may raise further concern among some MPC members over the persistence of inflationary pressures, especially with services CPI having remained stubborn, running above 6% YoY for 18 months now, ahead of the March inflation report due tomorrow morning.
While that will, naturally, be a much more significant driver of BoE policy, with the 2% target likely to be met, albeit briefly, in the spring, the continued loosening of the labour market should leave policymakers on track to deliver the first 25bp cut of the cycle at the June MPC meeting, particularly with Committee members having flagged that policy will remain restrictive, even once the normalisation process has begun.
