UK sees both unemployment rate, wage growth drop in June

Unemployment rate in the UK decreased to 4.2% at the three months to June, against a market expectation of rising from the May reading of 4.4% to 4.5%, the Office for National Statistics (ONS) reported Tuesday.

The drop coincided with a further slowdown in total earnings growth rate to 4.5%, in nominal terms, easing a major worry facing the Bank of England that elevated wage would keep service inflation at high level.

The surprising decrease in jobless rate came as employment rate, the percentage of population that holds a job, rebounded to 10 basis point to 74.5% from a 2021 low for the period of March to May.

The country’s central bank cut its policy rate to 5% at the start of this month to “reduce slightly the degree of policy restrictiveness” but remain concern that the second-round effects, as higher earnings increase may push retailers to rise their prices further, could be “more enduring in the medium term.”

Catherine Mann, an external member of the Bank’s monetary policy committee, expressed her worries in a Financial Times interview this week that wage pressures in the economy could take years to dissipate while goods and services prices may increase again.

ONS have cautioned against interpreting short-term changes in the its labor force statistics due to response rate bias since the they introduced by-telephone survey during the pandemic.