Deutsche Bank’s Chief UK Economist Sanjay Raja has analyzed the latest UK labour market data, noting that while headline figures appear strong, underlying indicators reveal continued fragility in the market [1]. The unemployment rate posted a surprise drop to 4.9%, missing consensus expectations for an unchanged print at 5.2% [1]. This improvement follows a robust GDP print in February, suggesting the UK economy is performing better than anticipated on the surface [1].
However, Raja cautions against excessive optimism, highlighting several concerning trends beneath the headline numbers. The flash HMRC Payroll data indicated an 11,000 fall in employees, with February 26 data revised lower to a decrease of 6,000 employees [1]. Additionally, the Labour Force Survey reported a 136,000 increase in redundancies over the three months to February 26, signaling rising job losses [1].
Wage growth also showed signs of moderation, which may comfort the Bank of England’s Monetary Policy Committee (MPC). Average Weekly Earnings (AWE) Regular Pay growth slowed to 3.6% (three months year-on-year), while Private Regular Pay decelerated further to 3.2% (three months year-on-year) [1].
Despite the positive headline unemployment figure, Deutsche Bank maintains that the underlying weakness and slack in the labour market persist. The data is unlikely to change the Bank of England’s overall assessment of labour market conditions, as vulnerabilities remain evident [1].
CONCLUSION
While the UK labour market's headline unemployment rate has improved, deeper data points to ongoing weakness and slack. Deutsche Bank suggests that these mixed signals are unlikely to shift the Bank of England's view on labour market fragility. Investors should remain cautious, as underlying vulnerabilities persist despite surface-level improvements.