Rise in UK jobless rate muddies Sunak's message to voters

By Andy Bruce and William Schomberg

(Reuters) -Britain's labour market showed more signs of cooling in April as the unemployment rate rose, an awkward development for Prime Minister Rishi Sunak ahead of the July 4 election, despite another month of robust wage growth.

"The last parliament has been dismal for employment, and today's figures are the worst since the pandemic," said Tony Wilson, director of the non-partisan think tank, the Institute for Employment Studies.

The jobless rate for the three months to April rose to 4.4% from 4.3% between January and March, the highest reading since the three months to September 2021, the Office for National Statistics said on Tuesday. Economists polled by Reuters had forecast no change in the rate.

The number of employed people has fallen by 207,000 since the end of 2023, while unemployment has increased by 190,000, the data showed.

Sterling fell after the data and government bond prices rose.

"For the first time since Thatcher's first term, the number of people in work has fallen, down by around 40,000 since Boris Johnson's victory," Wilson said, referring to Britain's labour market since the December 2019 election.

The opposition Labour Party is on course to win the national election on July 4, according to opinion polls which give Keir Starmer's party a roughly 20-point lead over the governing Conservative Party.

Sunak, whose pitch to voters rests on the idea that the economy is improving under his management, can at least point to a robust increase in wages, adjusting for inflation.

Average weekly earnings excluding bonuses, and adjusted for the consumer price index, rose 2.3% in the three months to April compared with a year ago - the strongest such reading in nearly three years.

Britain's inactivity rate - measuring people not in work and not looking for employment - rose to 22.3%, its highest since mid-2015, highlighting what the Bank of England sees as a source of inflation in the labour market.

The number of inactive workers due to long-term sickness rose to a new record high of 2.3 million.

Sunak has promised to tighten sickness benefit rules if re-elected, a reform his Conservative Party has said would eventually save 12 billion pounds ($15.3 billion) a year - a goal that economists think would be hard to achieve.

INACTIVITY UP

Media reports said Sunak was expected to announce later on Tuesday that he would cut social security contributions by a further two percentage points if the Conservatives defy the opinion polls and win the election.

Cuts to National Insurance contributions are seen as a way to encourage more people into the labour market, although two recent two-point cuts have so far failed to stem the rise in inactivity.

Wage growth data, a key gauge of inflation pressure for the Bank of England which is due to make its next policy announcement on June 20, remained hot.

Nominal average weekly earnings excluding bonuses grew by 6.0% in the three months to the end of April compared with the same period a year earlier.

Economists polled by Reuters had forecast wage growth of 6.1%.

Wage growth in the private sector - also watched closely by the BoE as a gauge of domestic inflation pressure - cooled to 5.8% from 5.9% in the three months to April.

Investors do not fully price a first quarter-point rate cut by the BoE before November.

The ONS is still reworking its Labour Force Survey that measures unemployment, employment and inactivity, and repeated that Tuesday's figures should be viewed along with other gauges of the labour market, rather than as a definitive measure.

(Reporting by Andy Bruce; Editing by William Schomberg, Andrew Heavens and Bernadette Baum)