UK jobless rate seen holding steady at 5.1% in March

The UK’s headline unemployment rate will hold steady at 5.1% in March, with wage growth picking up to 3.75% by year end, says Pantheon Macroeconomics.

It said the 21K rise in the headline, three-month average, unemployment rate between November and February confirmed last month that the period of fantastically strong growth in employment had ended.

“As such, we expect Wednesday’s labour market data to show a stable unemployment rate and a further pick-up in wage growth, beginning a pronounced acceleration that will compel the Monetary Policy Committee (MPC) to raise interest rates by the end of this year," said Pantheon's chief UK economist, Samuel Tombs.

Bank of England's MPC held the benchmark interest rate at 0.5% last Thursday, and QE at £375bn. It also pared its economic growth forecasts out to 2018.

“This favourable compositional effect tips the scales firmly in favour of expecting the headline (jobless) rate to have held steady at 5.1% in March,” Tombs said.

The slowdown in employment growth therefore does not look set to prevent an acceleration in wages in response to labour shortages.

“We expect year-over-year wage growth including bonuses to pick up to 1.7% in March, pushing up the headline rate to 1.8%, above the consensus, 1.7%,” Tombs added.

“And with the job market slack set to remain at very low levels, we expect wage growth to rise to an MPC-scaring 3.75% by the end of this year.”