U.K. labor market continues to remain tight, jobless rate falls to 3.8 pct in three months to March

The U.K. jobs report released today further affirms that the labor market remains tight and either close to or at full employment. In spite of the uncertainties over the longer-term outlook for the U.K. economy, and matching developments seen in the official GDP data, employment in the three months to March rose by 99,000. In spite of being lower than expected, such a strong rate of job creation was still enough to further lower the unemployment and push the jobless rate to a fresh 44-year low of 3.8 percent.

Delving into details, over three-quarters of the total gain in employment in the three months to March were classified as being full-time. Furthermore, in spite of surveys of business activity indicating towards weak hiring intentions, the elevated number of unfilled vacancies implies that there is some pent up demand for labor, noted Lloyds Bank in a research report.

The latest read on job vacancies indicated that the number of positions for which employers were actively seeking to recruit from outside their business continued to be elevated, close to a record high.

A considerable proportion of the rise in demand for labor has been met by people transferring into roles straight from being outside the labor force and classed as inactive. Nevertheless, with the economic inactivity rate close to its all-time low, it is likely to become increasingly difficult to reduce the rate much further.

The latest report measures of pay growth eased. Regular pay growth eased to 3.3 percent on a three-month/year basis, while total pay growth, moved down to 3.2 percent three-month/year from 3.5 percent previously.

“While we expect the recent softening in pay growth to be temporary, more important for the Bank of England will be the continuation of disappointing news in terms of productivity. According to the ONS’s latest flash estimate, output per hour in Q1 was down 0.2 percent versus a year ago”, said Lloyds Bank.

At 11:00 GMT the FxWirePro's Hourly Strength Index of British Pound was bearish at -90.3851 while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -26.4909 more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex