• The unemployment rate hit 5% in September to November 2020, according to ONS data released this morning
• Average wage growth increased to 3.6%
• However, this is simply the statistical effect of a fall in the proportion of lower paid jobs within the economy, according to the ONS
Laith Khalaf, financial analyst at AJ Bell:
“Unemployment hit 5% at the back end of last year and unfortunately the renewed lockdown means even more job losses are in the post. The unemployment rate was expected to peak this summer, at somewhere around 7.5%, but a lengthening lockdown will have economists tearing up their predictions, and pushing them back, and up.
“Even the strong wage growth recorded in the latest data isn’t cause for celebration, seeing as it derives from the loss of lower paid jobs in the economy. While the headline figure is 3.6%, the ONS estimates that without the lift from lower income job losses, underlying wage growth is likely to be under 2%. That compares to over 3% in the previous year.
“The deteriorating data throws into fresh focus the Bank of England interest rate decision next week, where negative interest rates will be a point of discussion. The market isn’t anticipating any change in the headline base rate at next week’s meeting, but the odds of a rate cut this year have now risen to four in ten. Clearly much depends on the course of the pandemic, but despite record low interest rates, the monetary policy outlook in the UK remains tilted towards rate cuts rather than rises.”
