The resilience of the UK’s labor market was on full display. The ILO Unemployment Rate held at 4.4% in the three months to February 2023. Despite this otherwise remarkable consistency, 18,700 more people filed for jobless benefits in February. This dramatic increase is a stark reminder of an already difficult job market. Meanwhile, employment data revealed a notable rise in employment change, with 205,000 jobs added in February, compared to 144,000 in January.
Though the unemployment rate held steady, average earnings told a different story. In February, average earnings without the bonus jumped 5.9% YoY. That’s up just a bit from the 5.8% annual increase in the prior period. Inclusive of bonuses, average earnings skyrocketed by 5.6%. As some analysts pointed out, this was underwhelming growth and this weighed on the strength of the Pound Sterling in foreign exchange markets.
Unemployment Rate Holds Steady
The UK’s ILO Unemployment Rate stuck at 4.4% three months to February. As market expectations and a solid labor market backdrop reflect, this figure should settle around the 100k-150k range. Analysts had largely been expecting this kind of consistency, which should offer some degree of reassurance to both policymakers and economists.
The net-absorbing increased by 18,700 during February. Disappointingly, Americans claiming jobless benefits continued to rise. This increase raises an important question about just how strong our labor market is. As overall employment levels might give the impression that things are pretty stable, some industries continue to struggle. Analysts had forecast a more positive result for the claimant count change, with a 4.4% increase expected for the period reported. The increase ended up being way bigger than that.
This mixed picture creates a double edged sword for the UK’s labor market. Typically, a stable unemployment rate is a sign of great news. Yet, the recent spike in jobless claims reminds us that millions of people are still suffering in this new economy.
Employment Change Shows Positive Growth
This morning’s employment change numbers for February came in strong with 205,000 jobs added—well above the upwardly-revised January number of 144,000. This dramatic growth is indicative of historic momentum in our labor market. That’s a sign that firms are continuing to hire, despite economic headwinds.
Employment growth has been on fire, two main reasons why. These are a combination of big seasonal hiring trends, and a very strong recovery from the last disruption to the economy shrank by COVID. Experts warn that maintaining this boom will call for a continued investment in workforce development, as well as wrestled sector-specific challenges.
Additionally, though national employment numbers seem promising, regional inequalities and sector-specific struggles are still prevalent. Second, as industries recover at unequal speeds, some places will still be left behind when the national numbers are OK.
Earnings Growth Reflects Mixed Outcomes
Latest average earnings data for February adds a complex picture to the American economic landscape. Even without bonuses, average earnings were up 5.9% over the past year, which means that wage growth is finally starting to match inflationary growth. That increase, at 6.3%, is a little higher than January’s 5.8% bump, indicating a potential positive trend in earnings.
Using a measure of average earnings that does account for bonuses, there was no big acceleration at all. The acceleration remains the same as reported—a 5.6% increase. Just as significantly, it was an analysts’ term for sad because it is in stark opposition to expectations for robust wage growth due to increasing cost of living.
The ripple effects of these earnings numbers go beyond poorly compensated essential workers to the state of economic conditions writ large. Disappointing average earnings would be pound-negative. The financial markets tend to view wage growth as a key measure of economic success. Following the release of mixed employment data, GBP/USD managed to defend gains near the 1.3200 mark, trading slightly higher at 1.3201 during early European trading sessions.