The UK jobless rate increased for the first time in nearly two years in the fourth quarter and wages grew at a steady pace.
The unemployment rate rose by 0.1 percentage points to 4.4 percent in the three months to December, data from the Office for National Statistics showed Wednesday.
This was the first increase in almost two years. The jobless rate was expected to remain at 4.3 percent.
The number of unemployed rose by 46,000 from the September quarter to 1.47 million.
At the same time, the employment rate rose to 75.2 percent from 74.6 percent a year ago. The number of people in work rose 88,000 sequentially to 32.15 million.
Average earnings including bonus grew 2.5 percent on a yearly basis in the December quarter, the same rate as seen in the three months to November and in line with expectations.
Earnings, excluding bonus, also climbed 2.5 percent annually. Nonetheless, the rate was below consumer price inflation of 3 percent registered in December.
James Smith, an economist at ING Bank, said wage data suggests that the tightness in the labor market is causing firms to lift pay packets to retain staff and hire new talent.
Further, momentum in wage growth makes a May rate hike all the more likely, although the latest employment data is a little more concerning, the economist noted.
In January, the claimant count rate fell to 2.3 percent from 2.4 percent in December. The number of people claiming unemployment benefits decreased by 7,200 in January.
In a separate communique, the ONS said output per hour increased 0.8 percent in the fourth quarter, following a 0.9 percent rise in the previous quarter.
Another report from ONS showed that the British budget balance showed its second highest January surplus on record.
Public sector net borrowing, excluding public sector banks, was in GBP 10 billion surplus in January. Economists had forecast a surplus of GBP 9.6 billion.
During the current financial year-to-date, PSNB excluding public sector banks, decreased GBP 7.2 billion to GBP 37.7 billion, this was the lowest year-to-date net borrowing since the financial year-to-date ending January 2008.
Barring a large deterioration in the final two months of the year, then, borrowing still looks on course to undershoot the Office for Budget Responsibility’s full-year forecast, of GBP 49.9 billion, perhaps by as much as GBP 10 billion, Ruth Gregory, an economist at Capital Economics, said.