UPDATE: |Warning issued as wage figures revealed ahead of Bank of England interest rates decision News

Economists are warning about unemployment levels after new data shows availability of jobs has worsened despite wages increasing

Economists have issued a warning about unemployment levels after new wage figures have been revealed ahead of the Bank of England’s interest rates decision. UK wages grew by 5.9% for the three months to February, according to newly released data by The Office for National Statistics (ONS).

UK wages continued to grow after recent public sector pay increases, growing at the same rate as the previous quarter – which had been the highest level since April last year.

Elevated levels of wage growth will be considered by Bank of England officials when they vote on whether to reduce interest rates from their current level, 4.5%, at their meeting next month.

Meanwhile, the availability of jobs has worsened, with vacancy numbers dropping to below pre-pandemic levels in 2020 for the first time. Vacancies fell to 781,000 for the three months to March and the UK unemployment rate remained at 4.4%, according to the data.

ONS also revealed that the employment rate for people aged between 16 and 64 was 75.1% – with Labour saying last year it planned to increase the UK employment rate to 80%.

Economists are now warning that unemployment levels may rise over the rest of the year and the growth in UK GDP may slow down due to the increase in US tariffs and the associated policy uncertainty.

Matt Swannell, chief economic adviser to the EY Item Club, said: “The unemployment rate was unchanged at 4.4% across December to February, but continued issues around data reliability mean this reading should be taken with a pinch of salt.

“Payrolled employee numbers declined over the three months to February, while job openings nudged down too.

“The large increase in US tariffs and the associated policy uncertainty will likely see UK GDP growth slow and unemployment rise over the rest of this year.”

Wages surpassed inflation by around 3% once inflation is taken into account, with this being 2.8% above inflation including bonuses, the data also showed. And pay growth, including bonuses, was 5.6% for the period, which is in line with market expectations.

Inflation surprisingly dipped to 2.8% in February after the prices of clothes and shoes fell for the first time in more than three years.

ONS director of economic statistics Liz McKeown said: “Regular pay growth remains strong having increased slightly in the latest period.

“Growth accelerated in the public sector as previous pay rises fully fed through to our headline figures, while pay in the private sector was little changed.

“The latest survey results estimate that the unemployment rate is unchanged on the previous three months, while separately the number of employees on payroll fell slightly over the same period.”

Monica George Michail, NIESR associate economist, said: “The recent rise in the national minimum/living wage in April is expected to keep earnings growth elevated in the short run.

“However, with high uncertainty around the economic outlook and slowing hiring activity, wage pressures are expected to ease gradually.”