UK Unemployment Rate Unexpectedly Falls to 3.8% in December

Bob Mason

The UK unemployment rate fell from 3.9% to 3.8% in December, overshadowing a fall in wage growth. The latest numbers may test bets on a BoE rate cut.

UK Unemployment Rate

In this article:


  • The UK unemployment rate fell to 3.8% in December.
  • Wage growth slowed further in Q4 but remained elevated.
  • Later today, the US CPI Report warrants investor attention.

Labor Market Overview, UK – February 2024

On Tuesday, the UK labor market was under the spotlight. Wage growth remained a focal point for the Bank of England despite the softer figures for November 2023.

In February, average earnings (inc. bonus) increased by 5.8% in the three months to December, year-over-year (3M/Yr). Economists forecast average earnings (inc. bonus) to increase by 5.6%. In November, average earnings (inc. bonus) increased by 6.5% (3M/Yr), down from 7.2% in October.

The unemployment rate declined from 3.9% to 3.8%, while employment increased by 72k. Economists forecast employment to rise by 73k and a 4.0% unemployment rate.

Bank of England Monetary Policy Implications

The softer-than-expected wage growth figures would normally incentivize the BoE to discuss timelines for cutting interest rates. Softer wage growth could reduce disposable income. Downward trends in disposable income could curb consumer spending and dampen demand-driven inflation.

However, the unexpected fall in the UK unemployment rate could signal sticky wage growth trends. Tighter labor market conditions could support wage growth and increase disposable income.

GBP/USD Reaction to the UK Labor Market Overview

Before the UK employment figures, the GBP/USD rose to a high of $1.26287 before falling to a low of $1.26090.

However, in response to the labor market numbers, the GBP/USD rallied from $1.26190 to a post-stat high of $1.26405.

On Tuesday, the GBP/USD was up 0.08% to $1.26386.

GBP/USD reacts to UK unemployment rate fall.
130224 GBPUSD 3 Minute Chart

Up Next: The US CPI Report

Later today, the US CPI Report will garner investor interest. Sticky inflation could reduce bets on the Fed cutting interest rates before June. Economists forecast the US annual inflation rate to decrease from 3.4% to 2.9% in January. However, economists expect the core inflation rate to decline from 3.9% to 3.7%.

About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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