The unemployment rate in the UK climbed to 4.0% from March to May 2023, according to figures from the Office for National Statistics (ONS). The increase, which is the highest level since the last quarter of 2021, surpassed market expectations of 3.8%.
At the same time, average earnings growth, excluding bonuses, remained flat month-on-month at 7.3%. Market and equity analyst at InvestingReviews.co.uk, John Choong, warned that the persistent wage pressures could spell trouble for borrowers.
“This jobs data will translate into more pain for borrowers,” said Choong. “Wage pressures are showing no sign of easing.”
Choong added that the rise in wages is bad news for inflation or mortgage rates, with an increasing likelihood that the Bank of England may need to raise interest rates to a hefty 7% to combat a wage-price spiral.
In the three months to May 2023, the number of people in work increased by 102,000, below the market forecast of a 125,000 rise and less than half of the 250,000 advance in the previous period. This represented the smallest growth so far this year.
Choong pointed out that, “claimant counts in June, which serve as a leading indicator for unemployment, are showing signs that the labour market could be cooling, as the number of people claiming for unemployment benefits rose to 25,700. In tandem with this, the number of workers going on payroll also fell by 9,000.”
However, he cautioned that these figures are subject to revision and have been incorrect in the past.
With the UK’s inflation rate still the highest in the Organisation for Economic Co-operation and Development (OECD), the outlook remains grim for mortgage holders, the UK property market, and the UK economy in general, Choong concluded.
