The U.K. unemployment rate increased slightly in December, while wage growth slowed, according to data released Tuesday. The figures point to continued cooling in the U.K. labor market and could strengthen expectations that the Bank of England will consider cutting interest rates next month.
Data from the Office for National Statistics showed that the unemployment rate rose to 5.2% in the three months to December, up from 5.1% in the previous period. This marks the highest level since early 2021 and signals a gradual deterioration in labor market conditions.
At the same time, average earnings across the economy, excluding bonuses, grew at an annual rate of 4.2% in the three months to December. That represents a notable slowdown from 4.5% in the prior month, suggesting easing wage pressures.
Analysts at ING said that if these trends continue into the March data, the case for a Bank of England rate cut next month will become increasingly strong.
During its February meeting, the Bank of England kept its benchmark Bank Rate unchanged at 3.75%. The decision followed a narrow 5–4 vote, marking the third consecutive closely divided outcome by the Monetary Policy Committee.
Economists at Capital Economics noted that the absence of clear signs of labor market recovery, combined with slower wage growth, supports the view that the central bank may still have additional interest rate cuts ahead. They added that the probability of a rate reduction in March, rather than April, is gradually increasing.
Overall, the latest U.K. jobs data reinforces expectations that monetary policy could shift toward easing if economic softness persists.
