The U.K.'s unemployment rate was unchanged while wage growth held steady in the three months through May, adding to expectations that the Bank of England will leave interest rates unchanged next week.
The unemployment rate came in at 4.9%, unchanged compared with the three months through April, according to data released Tuesday by the Office for National Statistics.
A consensus of economists polled by The Wall Street Journal expected a rate of 5.0%.
"These figures point to a fragile labour market," said Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, noting that high employment taxes and economic uncertainty stemming from the Iran war are continuing to damp recruitment.
Elevated unemployment adds to signals that the BOE could leave interest rates unchanged when policymakers meet next week. While officials have warned they would respond if higher energy prices stemming from the conflict in Iran began feeding through into broader inflation, a cool labor market suggests domestic demand remains weak, limiting the ability of businesses to raise their prices.
Meanwhile, annual wage growth excluding bonuses held steady in the three months through May at 3.4% for a third consecutive month, pointing to a stabilization of cost pressures for businesses.
"These subdued figures likely shut the door on a July interest rate rise, by fueling hope that a softening labour market can help restrict inflation by restraining pay awards and dampening demand across the economy," Thiru said.
In a speech last week, Bank of England Gov. Andrew Bailey said that while the situation in the Middle East remains "unstable," the impact of higher energy prices on U.K. inflation has so far been limited.
"We are seeing continued fairly soft evidence on the passthrough into U.K. prices," Bailey said.
Consumer prices unexpectedly held steady at 2.8% in May, below economists' forecasts. June data, due to be published Wednesday, are expected to show inflation easing.
Escalating conflict in the Middle East could weigh further on hiring and business confidence, weakening the labor market, while at the same time keeping energy prices elevated and increasing the risk that inflation proves more persistent than policymakers expect.
Write to Don Nico Forbes at don.forbes@wsj.com
(END) Dow Jones Newswires
July 21, 2026 02:45 ET (06:45 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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