UK Wage Growth Stays Firm, Jobless Claims Ease—Rate Cut Hopes on Hold

Wage Pressure Remains a Key Concern for Policy Outlook

UK labor market data for early 2025 suggests moderate resilience, with a slower rise in jobless claims, steady unemployment, and wage growth holding above pre-pandemic averages. While not signaling overheating, the figures are stronger than many had anticipated and may influence the Bank of England’s policy stance.

Claimant Count Rise Softens

The Claimant Count Change increased by 18,700 in March, significantly undercutting expectations of 30,300 and down sharply from February’s 44,200. Although the total number of claimants reached 1.766 million, the deceleration in growth hints at easing labor market pressure. This suggests job losses may be stabilizing, offering relief after a weak start to the year.

Wage Growth Holds Steady at Elevated Levels

The Average Earnings Index (3m/y) remained at 5.6%, marginally below the 5.7% forecast. Despite economic headwinds, nominal wage growth remains firm—particularly when bonuses are included. Elevated pay levels continue to support household spending, but the persistence of wage inflation complicates the Bank of England’s rate-cut timeline. As inflation eases, real earnings are improving, helping restore consumer confidence.

Unemployment Rate Stays at 4.4%

The unemployment rate remained unchanged at 4.4% in the three months to February, in line with forecasts. While the figure signals labor market stability, the ONS has flagged volatility in the underlying data, urging caution in interpretation. Payrolled employee estimates and claimant counts are seen as more immediate gauges of labor conditions.

Market Forecast: Cautiously Bullish on Employment Stability

Traders should view the latest figures as mildly supportive of a stable UK employment picture. The softening in jobless claims and firm wage growth point to labor market resilience, reducing immediate fears of deterioration. However, wage inflation remains the key risk. If it persists, the Bank of England may hesitate to ease policy despite softer growth. The next labor data releases will be critical in confirming the trend. Until then, the outlook leans cautiously bullish for employment, with policy expectations finely balanced.