In April, the skills shortage that has been hurting the U.K. economy got worse, which made the job market even tighter.
The number of people getting unemployment benefits went down by 56,900. This is the fifth month in a row that the number has gone down by more than 50,000, and it was more than the 42,500 drops that was expected. The unemployment rate is now the lowest it has been since the early 1970s.
The lack of workers gave wage growth a new boost, and it kept going at a rate that was much higher than what the Bank of England thought was good for low inflation. Average earnings, including bonuses, went up by 7.0% year-over-year in April. This is up from a growth rate of 5.6% in March and is the fastest growth in the last seven months. When bonuses are taken out, wages went up 4.2%, up from 4.1% a month earlier.
Even at their current rate of growth, wages aren’t growing fast enough to keep up with inflation, which was over 7% per year through April. So, it doesn’t look like the cost-of-living crisis that is affecting the economy will get better any time soon.
Andrew Bailey, the head of the Bank of England, told parliament on Monday that he wouldn’t be able to stop inflation from reaching over 10% later this year. He said that Ukraine’s inability to export its agricultural goods was a big reason why food prices around the world were going up.
The markets reacted to the data by pricing in more interest rate hikes from the Bank, even though at its last meeting, the Bank had predicted that high food and energy cost inflation would cause the economy to start to shrink later this year. At 3:45 AM ET (07:45 GMT), the pound had gone up 0.5% to $1.2383, which was the highest it had been in almost a week.
Bailey’s testimony on Monday showed no sign that the Bank would change its plans.
Bailey said, “It’s a very, very hard place to be.” “It’s a very tough spot to be in if you think inflation will be 10% and say there’s not much we can do about it.”