Jobless rate rose for first time in two years, hitting 4.4%, with the number of people out of work rose 46k to 1.47mil the biggest rise since early 2013 while the number of people in work continued to rise by 88k to 32.15mil. Although average weekly earnings rose 2.8%y/y in December, it still lagged behind inflation, which means real wages is still in negative.

We feel it is still too early to conclude as to whether the latest figure is merely a blip or the beginning of an upturn in joblessness. While the rise in wages is due to tight labour market, it remains unclear on the potential wage increment from a more subdued economic conditions with high upfront costs. We believe BoE is likely to institute a rate hike as early as May and if not August with another hike in November. Much will depend if the wage growth remains strong and picks up to 3%.

• The unemployment level rose unexpectedly high in almost five years with about 1.47mil people out of work, an increase of 46k. It is the largest increase since early 2013 and the first jump since the summer of 2016. Hence, the unemployment rate rose to 4.4% in December from 4.3% in November.

• Meanwhile, the number of people in work continued to rise to 32.15mil though the increase of 88k was much smaller. With the economy experiencing both a rise in unemployment and employment, it indicates those inactive in the job market i.e. not seeking or available to work fell over the period.

• Looking at wage growth, the average weekly earnings that excludes bonuses gained by 2.8%y/y in December from 2.3%y/y in November. Despite evidence of improvement, we found the gain in wage still lags behind inflation which means that wage in real terms is still in the negative region.

• We feel it is still too early to form a conclusion as to whether the latest figure is merely a blip or the beginning of an upturn in joblessness. While the rise in wages is due to tight labour market, it remains unclear on the potential increment owing to a more subdued economic conditions with high upfront costs.

• The recent hawkish tone from Bank of England (BoE) suggest that the rate hike could possibly come as early as May. However, with the subdued data and Brexit uncertainties has raised some concerns on the prospect of rate hike. We believe BoE is likely to institute a rate hike as early as May and if not August with another hike in November. Much will depend if the wage growth remains strong and picks up to 3%.

Source: AmInvest Research - 22 Feb 2018