UK Unemployment Rate Drops: ONS Finally Releases Delayed Figures

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The Office for National Statistics has just published its long-delayed unemployment figures following a period of revisions, and the result confirms a robust labour market.

According to the ONS, the unemployment rate is now thought to have fallen to 3.9% in the three months to November, from 4.2% in the three months to August.

The new ONS LFS estimates were re-weighted to account for new population estimates, resulting in a suspension of the monthly figures that left economists guessing as to where the UK's labour market was trending.

The ONS had been trailing some temporary estimates, but these now appear to have overexaggerated the UK unemployment rate. The final results confirm the labour market is in robust shape and will give the Bank of England little reason to rush into an interest rate cut.

Image courtesy of Pantheon Macroeconomics

The ONS suspended the statistics from the Labour Force Survey (LFS) in October 2023, warning that a low response rate to the survey was proving problematic given changes in the population level.

The survey, which is the source for unemployment and employment figures, was replaced by an experimental series generated from alternative sources such as the claimant count numbers and HMRC real-time PAYE figures.

The resumption of the LFS measure utilises a reweighted sample that accounts for new population estimates, which are now higher, particularly in the 16-24 age category.

"The new figures show that the labour market is tighter than believed previously," says Philip Shaw, an economist at Investec. "Furthermore there is no evidence that conditions have loosened recently."

The survey also reveals the trend in inactivity is rising rather than falling, with the participation rate 0.6% pts lower than its peak last May."Last week’s Bank of England Monetary Policy Report highlighted the significance of labour market conditions in determining long-term inflationary pressures and so this release is likely to result in the Monetary Policy Committee taking a more cautious approach in assessing the appropriate time to bring interest rates down. UK interest rate markets have dialled back on their optimism of rate cuts this year, but are nonetheless pricing in three to four 25bp cuts this year. We reaffirm our view of three moves, starting in June," says Shaw. Long-term sickness is estimated to account for 30.4% of inactivity, now totalling over 2.8m and rising.