The UK claimant count increase foreruns unemployment ticking up

The UK labor market report for April came out mixed with the most of the labor market characteristics meeting the market expectations, but the number of the unemployment benefits seekers rising above expectations in April and the March figure being revised upwards.

The UK unemployment rate stays unchanged for April at the lowest level since 1975 of 4.2% and the wages are rising, but within the context, the headline figures are mixed.  The UK average weekly earnings excluding bonuses rose 2.9% y/y while earning including bonuses decelerated to 2.6% y/y in three months to March. The average weekly earning both excluding and including bonuses rose 2.8% in three months to February triggering the massive selloff on GBP/USD all the way down to 1.3460 from the April 17 22-month high of 1.4377.

Now the wage growth in the UK sees divergent trends when adjusted for inflation. The UK average weekly earnings in real, inflation-adjusted terms increased by 0.4% excluding bonuses, but were unchanged including bonuses, compared with a year earlier.

Adding to the negative side of the report is the above-forecast rising claimant count reaching 31.2K against 7.8K expected in April with a revision for March from 11.6K to 15.7K. Rising claimant count is a negative signal for the future of the UK labor market as the number of the unemployment benefits seekers increases adding to the army of 1.42 million people unemployed in the UK. That is an indication that the unemployment rate might have already reached the cyclical bottom and will pick up from 4 decades lows from here.

UK wage growth