Investing.com - The U.K. unemployment rate remained unchanged in January, data showed Thursday, and wage growth also held steady, reassuring the Bank of England to continue its path of gradual easing.
According to the Office for National Statistics, the jobless rate remained at 4.4% in the three months to January, unchanged from the prior the three months to August.
This was as expected, but remains the highest level since the three months ending in May.
Importantly, pay growth across the whole economy, excluding bonuses, also held steady at an annual 5.9% rate in the three months to January.
"With all the pessimism that was brewing around the U.K. labor market at the turn of the year, we have yet to see any tangible signs in the hard data that job losses are accelerating," said analysts at Deutsche Bank, in a note. "Instead, wage growth remains stubbornly high. And the labor market – though very sluggish – isn’t showing signs of breaking."
The policymakers have been studying wage growth figures closely, particularly after Britain’s consumer price index rose by 3% in the 12 months to January, the latest month for which data is available.
This is a full percentage point above the Bank of England’s 2% medium-term target.
A report from human resources data firm Brightmine, released before the unemployment data, indicated that pay increases granted by British employers have fallen back in line with inflation for the first time since October 2023.
Brightmine said employers were cautious before April’s rise in payroll taxes and the median pay award in the three months to the end of February held at 3% for the third consecutive rolling quarter, the joint lowest pace of increase since December 2021.
Concerns over inflation are expected to result in the Bank of England keeping its key interest rate unchanged at 4.5% at the conclusion of its policy-setting meeting later in the session.
And going forward, today’s labor market should do little to hurry the MPC in its rate cutting cycle, according to Deutsche Bank.
"Wage growth remains well above target-consistent levels. And with the labor market showing some modest signs of resilience, the MPC can bide its time, sticking to its ‘gradual and careful’ mantra. With headline inflation on the rise, however, the MPC will need some further evidence of a loosening labour market to continue its rate cutting cycle. We will be watching this carefully," the German bank added.