Revised survey results from the Office for National Statistics (ONS) revealed that the UK's unemployment rate in late 2023 was significantly lower than previously reported.
The new data, reflecting the latest population estimates, indicated an unemployment rate of 3.9% for the three months to November, contrasting with the temporary, experimental rate of 4.2% released by the ONS last month.
The Bank of England (BoE), closely monitoring the labour market, may face increased caution regarding rapid interest rate cuts in light of these findings. The re-weighted employment rate was estimated at 75.0%, compared to 75.8% in the experimental series, while the inactivity rate rose to 21.9% from 20.8%.
Economist Samuel Tombs from Pantheon Macroeconomics suggested that the new data could pressure BoE officials to delay interest rate cuts, emphasizing that the unemployment rate is likely to outperform forecasts. Despite the potential impact on interest rate decisions, the BoE had recently indicated the possibility of rate cuts as inflation decreases.
The revised labour estimates utilized the latest ONS population estimates to re-weight its Labour Force Survey (LFS), encompassing more young people and women. The ONS cautioned against reading too much into short-term changes in headline rates, emphasizing that the re-weighting did not address the volatility seen in recent months.
The ONS plans to make the improved LFS survey the primary source of labour market data from September 2024. The re-weighted estimates consistently portrayed a lower employment rate and higher inactivity rate than the experimental estimates, suggesting potential adjustments in economic policies in light of the evolving labour market scenario. Photo by Phil Whitehouse, Wikimedia commons.