February 2025 UK Jobs Report: Surprising Resilience Likely Won't Last

Unemployment held steady at 4.4%, where it has been since last November, while employment rose by a better-than-expected 206k on a rolling 3-month basis

Meanwhile, earnings continued to increase at a rapid clip, albeit somewhat softer than consensus. Overall pay rose 5.6% YoY, and regular pay by 5.9% YoY over the same period. While one old hope that earnings pressures fade somewhat as the year progresses, this is by no means guaranteed, even if risks to the labour market are biased towards weakness, as the impacts of the National Insurance changes are felt from Q2 onwards. Right now, though, the current clip of pay growth is clearly incompatible with a sustainable return to the BoE’s 2% inflation target over the medium-term.

In any case, though, policymakers on Threadneedle Street are unlikely to place much weight on this morning’s figures. While well-documented issues continue to plague the unemployment data, the earnings series is now also subject to question marks, and potential revisions, given late pay data submissions. At the present rate, the ONS seem unlikely to have got their house ‘in order’ until the tail end of next year at the earliest.

Taking that into account, it’s tough to imagine today’s data materially changing the policy outlook for the ‘Old Lady’. A 25bp cut at the next meeting in early-May remains nailed on, with further such cuts likely to be delivered on a quarterly basis over the remainder of the year, as headline CPI remains on a path towards 4% over the summer.

That said, risks to the outlook do now tilt in a distinctly more dovish direction, as downside growth risks continue to mount, chiefly as a result of President Trump’s numerous tariff announcements. Were policymakers to become confident that the risks of inflation persistence had sufficiently abated, a more rapid pace of normalisation could be delivered. Tomorrow’s March CPI data will, hence, be considerably more impactful in moving the needle for the BoE.