U.K. employment growth accelerates in March, wage growth likely to continue accelerating

U.K.’s labor market report released today gave some welcome news on the economy. In the three months to March, the economy added 197,000 jobs, accelerating from the 88,000 pace seen in the fourth quarter. Such a rebound implies that the U.K. economy proved more resilient in the first quarter than was implied by the preliminary estimate of the first quarter GDP. In spite of ongoing uncertainties in the U.K.’s longer-term economic outlook, the latest figures imply that near-term economic trends continue to be strong. Further falls unemployment were also seen, but these were not enough to push the jobless rate lower, which remained the same at 4.2 percent.

Such a jobless rate has historically shown a tight labor market. Further evidence of this was seen in the latest report. While overall average weekly pay fell to a 2.6 percent annual rate, regular pay growth rose to a 2.9 percent pace as compared with the 2.8 percent seen in the prior report.

Survey of hiring intentions and of economic activity imply that demand for labor should continue to be strong in the months ahead, noted Lloyds Bank in a research report. Meanwhile, evidence from pay settlement reports, these factors imply that wage growth should continue to accelerate.

“While we expect an ongoing recovery in wage growth to support a 25bps rate hike from the Bank of England this year (most likely in August), a more meaningful rise in pay would likely be needed to elicit a more aggressive policy response”, added Lloyds Bank.

At 16:00 GMT the FxWirePro's Hourly Strength Index of Euro was neutral at 15.1146, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 147.142. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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