GBP: Mixed labour market signals for BoE – Deutsche Bank

Deutsche Bank’s Chief UK Economist Sanjay Raja assesses the latest United Kingdom (UK) labour market data as stronger on the surface but still fragile underneath. He notes the surprise drop in unemployment and softer wage growth, which may comfort the Bank of England (BoE). However, he highlights falling payrolls, rising redundancies and weaker hiring intentions, arguing that the UK labour market still shows slack and remains vulnerable.

Stronger headline jobs data masks weakness

"The UK continues its streak of better-than-expected data. After a thumping GDP print in February, the labour market followed suit. The jobless rate posted a surprise drop to 4.9% – missing consensus expectations for an unchanged print (5.2%)."

"Despite the labour market seemingly entering the Iran conflict on better footing, we would caution on any optimism just yet. Indeed, underneath the hood, and beyond the headline unemployment rate, signs of weakness continue."

"The flash HMRC Payroll data pointed to a 11k fall in employees (with the Feb-26 data revised lower too to -6k). The Labour Force Survey showed a 136k increase in redundancies in the 3m to Feb-26."

"There was some positive news for the MPC too. On the wage front, AWE Regular Pay growth continued to slow – falling to 3.6% (3m/YoY). Private Regular Pay slowed even more to 3.2% (3m/YoY)."

"Big picture, we do not think today’s data will alter the BoE’s image of the labour market. Despite a much better unemployment reading, underlying weakness persists. There is still slack in the labour market."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)