However, beneath the surface of this seemingly strong reading lie signals of clear weakening: the number of employees recorded in the payroll system in March fell by 11,000 compared to the expected unchanged figure, and the quarterly pace of new job creation slowed to just 24,000 versus the forecasted 35,000. The number of people claiming unemployment benefits rose, however, by 26.8 thousand, exceeding the previous reading.
Key signals from today’s release
The most important signal from today’s release, however, is the pace of wage growth in the private sector, which fell to 3.2 percent year‑on‑year.
This is the lowest level since the pre‑COVID pandemic period and a clear indication that wage pressure in the real economy is weakening.
The overall average weekly earnings index rose 3.8 percent year‑on‑year and was slightly above forecasts, but after accounting for inflation real wages remain virtually unchanged.
The clear divergence between public sector wage growth of 5.2 percent and private sector growth of 3.2 percent indicates that the wage aggregate is inflated by one‑off effects in public administration and should over time converge to lower private values.
GBP/USD pair remains stable
In the context of the Bank of England’s monetary policy, today’s data do not provide arguments in favour of a rate hike, which is currently priced by the market with a probability exceeding 57 percent for July and over 72 percent for September.
With the current base rate at 3.75 percent, cooling private wage dynamics, a rising rate of occupational inactivity reaching 21 percent and a weakening hiring pace combine to paint a picture of a labour market that is not overheating.
The GBP/USD pair remains stable around 1.3500, and the market is currently pausing a definitive assessment of the data due to their sensitivity to revisions.
If subsequent readings confirm a deflationary trend in private wages, BoE rate hike valuations could be revised downwards, creating pressure for the pound to weaken.
In the Forex market, the GBP performs relatively weakly, with the US dollar providing a counterbalance.
In general, the world reserve currency is best served by the New Zealand dollar.
