UK unemployment figures rise to 1.7m

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Recent improvements in the UK labour market have slightly eased off with unemployment up by 21,000 in the period between December and February to 1.7m.

Despite the news, partly attributed to June’s Brexit referendum, employment sits at 74.1 per cent, the joint-highest since records began.

Headline earnings growth has fallen to 1.1 per cent in February, down from 2.6 per cent in January, its lowest point in the last 16 months.

The Bank of England believes earnings growth needs to be at 3 per cent for to achieve its target inflation rate of 2 per cent.

The figures have made the likelihood of any impending rate rise from the Bank of England extremely unlikely and prompted speculation that it may even cut rates.

Low employment figures could be partly due to business uncertainty in the lead up to June’s referendum on the UK’s membership in the EU, IHS Global Insight said in its analysis of the figures.

Mark Carney has already warned that the Brexit referendum means the Bank of England is likely to react more cautiously to economic news and figures over the first half of 2016.

Other contributing factors may be the introduction of the National Living Wage, which came into effect this month, as well as lacklustre economic activity both at home and abroad.

IHS said it expected the unemployment rate to come down to 4.9% by end-2016 and to a low of 4.6% in 2017, if the UK votes to remain in the EU.

Ben Brettell, senior economist at Hargreaves Lansdown, says overall the labour market was in “reasonable health”, but warned uncertainty around Brexit would continue to have an impact in the lead up to June’s referendum.

“Last week the Bank of England said that concerns about the EU referendum had begun to affect the real economy, and the increase in unemployment announced today adds some weight to that hypothesis,” Brettell said.

“It’s possible businesses are delaying decisions about hiring and investment until after June’s vote, which could lead to a slowdown in the first two quarters of this year.