UK jobless up for first time since Brexit vote aftermath

February 21, 2018 - 7:23 am

LONDON (AP) — Unemployment in Britain has risen for the first time since the aftermath of the country's June 2016 vote to leave the European Union, official figures showed Wednesday, a development that could alter market expectations of another interest rate increase from the Bank of England in May.

In its monthly assessment of the labor market, the Office for National Statistics found that the number of people out of work rose by 46,000 in the three months to December from the previous quarter to 1.47 million. That was the first rise since the three-month period to August 2016, which straddled the Brexit vote.

As a result of the increase, the unemployment rate on a quarterly basis ticked up for the first time since February 2016, albeit by a modest 0.1 percentage point to a still historically low level of 4.4 percent.

The picture is somewhat blurred by the fact that employment in the British economy increased by 88,000 during the period. Statisticians said the reason why both employment and unemployment increased at the same time was that the number of people deemed to be inactive declined.

Elsewhere, the statistics agency found an uptick in wages, which could conversely harden the resolve of some rate-setters at the Bank of England to raise interest rates again, possibly as soon as May.

It said average weekly earnings in the three months to December excluding bonuses were up 2.5 percent on the previous year. That's up from the previous month's equivalent rate of 2.3 percent. Including bonuses, the rate was unchanged at 2.5 percent.

Still, wage increases are lagging price rises, meaning household incomes remain stretched as the country enters a crucial stage in Brexit discussions.

The wage rates are below the inflation rate of 3 percent, which is a full percentage point above the Bank's target. Inflation was stoked by the Brexit vote as the subsequent slide in the pound raised the cost of imported goods such as energy and food.

The views of Bank of England Governor Mark Carney and others from the nine-member rate-setting panel will be gauged later Wednesday when they testify to lawmakers.

Earlier this month, Carney did not rule out another quarter point rate hike to 0.75 percent in May in light of the above-target inflation.

"For the Bank of England, which has said rising wages are a key argument for tighter monetary policy, today's data makes a May rate hike all the more likely — although as always, this still relies on renewed Brexit progress over coming weeks," said James Smith, developed markets economist at ING.

The pound's fortunes over the rest of the day could hinge on what Carney and the others say. In midday trading, the pound was 0.5 percent lower at $1.3921.

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