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UK Q1 Jobless Rate Falls; Earnings Growth Remains Weak

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The UK unemployment rate declined in the first quarter despite a slowdown in economic growth, while earnings growth remained weak amid rising inflation.

The ILO jobless rate eased to 4.6 percent in the three months to March, the lowest since 1975, data from the Office for National Statistics showed Wednesday.

The rate dropped from 5.1 percent in the previous year and 4.7 percent in the three months to February.

The number of unemployed decreased by 53,000 from the previous quarter to 1.54 million in the three months to March.

Following seven consecutive quarters of growth, the employment rate reached a new record high of 74.8 percent in the first quarter.

Supported by bonuses in the finance and insurance sector, average earnings including bonus advanced 2.4 percent annually, in line with expectations. Excluding bonuses, earnings grew 2.1 percent, the least since July 2016.

Intensifying the squeeze on real wages, consumer price inflation spiked to 2.7 percent in April.

As inflation begins to fall back next year as the upward pressure from the drop in the pound starts to fade, real wages will begin to rise again, Paul Hollingsworth, a UK economist at Capital Economics, said.

As a result, the forthcoming squeeze on real wages should be nowhere near as severe or prolonged as that seen after the financial crisis, the economist said.

IHS Markit economist Howard Archer remains skeptical that the labor market can sustain its current firmness as the economy stutters. And uncertainties over the outlook are likely magnified by difficult Brexit negotiations with the EU that will come increasingly to the fore once the general election is done and dusted, he added.

In April, the number of people claiming unemployment benefits increased by 19,400 from the previous month, ONS data showed. The claimant count rose to 2.3 percent in April from 2.2 percent in March.

Another report from ONS showed that labor productivity decreased in the first quarter. Output per hour dropped 0.5 percent sequentially, in contrast to a 0.4 percent rise in the fourth quarter.

This was the first quarterly fall in output per hour since the fourth quarter of 2015, following four consecutive quarters of growth.

According to Agents' summary of business conditions, published by the Bank of England on Wednesday, consumer spending growth had moderated as spending power had been hit by higher prices.

In the labor market, recruitment conditions had tightened a little further, with skills shortages reported in a wider range of activities. Pay awards remained clustered around 2-2.5 percent across the economy, the summary showed.

by RTT Staff Writer

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