- Employment +296k vs Reuters poll forecast +170k
- Jobless rate holds at 3.8% despite expectations for a rise
- More people return to labour market
- Regular pay growth edges up but lags far behind inflation
- Bank of England watching for inflation heat in jobs market
LONDON, July 18 (Reuters) - The number of people in work in Britain jumped by the most since mid-2021 in the three months to May and the unemployment rate held near a half-century low, suggesting the cost-of-living squeeze has not yet hit demand for staff.
With the Bank of England worried about the risk of inflationary heat in the labour market, official data also showed more people were available for work, possibly weakening the case for a bigger-than-usual BoE rate hike next month.
The Office for National Statistics reported an increase of 296,000 in the number of people in employment, the most since the three months to August last year.
A Reuters poll of economists had pointed to a smaller increase of 170,000.
The jobless rate held at 3.8%, defying a forecast in the poll for it to rise to 3.9%.
While the size of the workforce remains below its level just before the COVID-19 pandemic, the number of people in full-time employment hit a record high, in contrast to the number of self-employed people which remains lower.
The signs of continued strong hiring may bolster the BoE's confidence about raising interest rates for the sixth time since December next month as it tries to tackle the surge in inflation towards double-digits.
ALARM BELLS
But there was no clear sign in the data that might ring alarm bells at the central bank about inflationary pressure building further in the labour market, requiring it to raise rates by more than its usual quarter percentage-point moves.
Samuel Tombs, an economist with Pantheon Macroeconomics, said a 0.8% three-month-on-three-month increase in the size of the workforce in May was the largest since January, 1984.
"The labour market no longer is tightening, easing the pressure on the Monetary Policy Committee to step up the pace of its rate hiking cycle," he said.
But Ruth Gregory at Capital Economics said the big jump in employment would add a bit more pressure on the MPC to opt for a half percentage-point increase on Aug. 4.
The level of new redundancies fell to 51,000 in the three months to May, the lowest since at least the mid-1990s when records started, the ONS data showed.
Investors on Tuesday were pricing in an 86% chance of a 50 basis-point hike next month, according to data from Refinitiv.
The BoE says it will act forcefully if it sees that the leap in inflation - which is expected to hit 9.3% in figures for June due on Wednesday - is becoming embedded in the economy.
The Office for National Statistics said growth in regular pay picked up slightly in the three months to May to 4.3%.
But that represented the biggest fall in records going back to 2001 when adjusted for the consumer price index measure of inflation.
Growth in total pay, including bonuses, slowed to 6.2% from 6.8%.
Many employers have resorted to paying bonuses to attract or retain staff amid the shortage of workers.
A fall of 144,000 "inactive" people - neither in work, nor looking for it - was the biggest drop since shortly before the pandemic hit Britain, possibly easing the BoE's concerns about inflation pressure in the labour market.
Reporting by William Schomberg, Editing by Kylie MacLellan, Andy Bruce, Andrew Heavens and Ed Osmond
Source: Reuters