UK unemployment rate falls to 4.9% and wages grow more than expected

Fears have grown that employers will lay off staff to cope with rising costs from the war in Iran. Photograph: Bloomberg/Getty View image in fullscreen Fears have grown that employers will lay off staff to cope with rising costs from the war in Iran. Photograph: Bloomberg/Getty UK unemployment rate falls to 4.9% and wages grow more than expected Drop will put pressure on Bank of England to raise interest rates despite peace deal in Iran war Business live – latest updates Unemployment fell and wages increased in April, official figures showed, putting pressure on the Bank of England to raise interest rates despite a peace deal in the Middle East. The latest figures from the Office for National Statistics (ONS) showed unemployment slipped to 4.9% in the three months to April from 5% in the three months to March. Average wages excluding bonuses remained the same at 3.4%, and rose 4.4% excluding bonuses, flat on the previous month after a revision up from 4.1%. Economists had expected the unemployment rate to remain at 5%, and for wage growth to ease to 4%. UK firms halt investments and hiring as Iran war pushes up costs, bosses warn Read more Annual average regular earnings growth was 5.1% for the public sector, and 2.9% for the private sector. The Bank’s governor, Andrew Bailey, has cited strong public sector pay as a concern for its monetary policy committee, which is expected to hold rates at 3.75% later on Thursday. Analysts said the central bank would be concerned that a downward trend in wages had stalled, which could increase spending in the economy more than expected and prevent inflation falling back to the MPC’s target of 2%. The ONS said on Wednesday that the consumer prices index remained steady at 2.8% in May. Ashley Webb, an economist at the consultancy capital economics, said: “Today’s data release increases the chances of one or two “insurance” hikes later this year.” But he said the rises were unlikely while the economy remained weak. “The big picture is that the labour market is still very weak, and likely to weaken further,” he added. James Smith an economist at ING, discounted the effect of higher wages in the public sector, which have been affected by delayed pay deals, saying the focus would be on the private sector where wages and employment continued to fall, especially in the retail and hospitality sector “While the Bank of England can’t totally ignore [the public sector], it remains much more focused on the private sector. And here pay growth is still easing off. “The annual rate is now below 3%, a sizeable drop from 5.2% a year ago. The three-month annualised rate is even lower and suggests that the annual rate has further to fall in the near-term. Employers were less likely to take on permanent full-time staff than they were earlier in the year in response to the war in the Middle East, which has shaken business and consumer confidence . PAYE payroll employment rose by 2,000 in May, but this only partly offset a chunky 53