UK labour market, final festive blowout ‘ahead of a painful spring’

The employment rate came in at 74.9%, up on the previous quarter.

Unemployment came in at 4.4%, up on the previous quarter and better than market expectations of 4.5%.

Economic Inactivity fell quarter-on-quarter to 21.5% and annual wage growth came in at 5.9%, versus 5.6% in the previous three months and in line with market expectations of 5.9% (Trading Economics).

Nicholas Hyett, Investment Manager at Wealth Club, said, “The UK Labour market tightened a bit more than expected over the Christmas period, with unemployment lower than feared and wages rising. However, we worry that this proves a final festive blowout ahead of a painful Spring.

Rising living wages and an increase in employers national insurance contributions, mean lots of large employers have said they may look to cut wage bills ahead of April. The supermarket sector has already reported job losses, and others are expected to follow as the changes approach.

While a sudden flurry of job losses could take some heat out of the labour market – reducing inflation – the danger is that it leads to a spike in unemployment which impacts growth and the tax take, putting the government’s slim fiscal margins under yet more pressure. The government will be watching the next few months’ numbers through their fingers.”