UK Jobs Market Fares Better Than Feared Ahead of BOE Meeting

Workers pass Bank London Underground station in the City of London. Photographer: Jose Sarmento Matos/Bloomberg Photo by Jose Sarmento Matos /Bloomberg

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(Bloomberg) — UK unemployment held steady and employers hired more staff in early signs that the labor market may be stabilizing ahead of the Bank of England’s interest-rate decision later today. 

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Tax data showed the number of employees on payrolls rose 20,000 in February after a 6,000 increase the previous month, the Office for National Statistics said on Thursday. Economists had expected a 10,000 decline.

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The ONS also revised payroll data for December and January, suggesting employers hired more staff in the aftermath of the Labour government’s budget compared to the previous estimates that pointed to continued job losses.

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The figures may suggest that the British jobs market is past the worst after employers reined in hiring and ramped up redundancies last year. The jobless rate was unchanged at 5.2% in the three months through January, slightly better than economists’ forecasts of a rise to 5.3%. 

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Wage growth excluding bonuses cooled more than expected to 3.8%, down from 4.1%, a sign domestic inflationary pressures were easing before the war in Iran. Private-sector earnings, the gauge watched by the BOE, slowed to 3.3%, the weakest figure since the end of 2020. The pound eased slightly.

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While a subdued labor market had supported the case for more rate cuts, the domestic picture is likely to take a backseat when the UK central bank reveals its latest decision on rates today. The BOE is widely expected to leave borrowing costs unchanged, as it assesses the inflation threat posed by the war in Iran.  

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Fresh turmoil in energy markets threatens to derail the BOE’s progress in bringing down inflation and evoke painful memories of surging household bills following Russia’s invasion of Ukraine in 2022.

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Despite rising price pressures, officials also have to consider growing evidence of lackluster growth and a deteriorating labor market. Figures last week showed the economy failed to expand in January, a disappointing reading that continued the weakness seen in the second half of 2025.

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“The number of workers on payroll rose slightly in the latest month but, overall, the recent picture has been broadly flat,” said Liz McKeown, ONS Director of Economic Statistics.

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Businesses have reined in hiring and shed workers since the Labour government hiked employment costs at its first budget. Demand for UK labor has also been sapped by a subdued economic backdrop and firms using artificial intelligence instead of taking on new staff.

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—With assistance from Mark Evans, Joel Rinneby, Irina Anghel and Philip Aldrick.

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(Adds details, chart, pound)

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