By Jack Denton
U.K. unemployment fell faster than expected between January and March, government data showed on Tuesday, as the number of employees on payroll increased for the fifth month in a row and hiring accelerated. The data show early signs of a U.K. economic recovery from the COVID-19 pandemic as more sectors get ready to reopen.
The unemployment rate fell to 4.8% in the first quarter of the year, according to the Office for National Statistics — the largest quarterly decrease since between September and November 2015. This outpaced analyst expectations.
And for the first time since the beginning of the pandemic, the employment rate rose. With employment at 75.2%, this key rate remains 1.4 percentage points lower than the December 2019 to February 2020 period, before the impact of the pandemic on the labor market.
“The latest figures suggest that the jobs market has been broadly stable in recent months, with some early signs of recovery,” the ONS said.
Meanwhile, the number of payrolled employees increased for the fifth month in a row in April, though it remains 772,000 below pre-pandemic levels. The number of job vacancies also accelerated between February and April at a rate of 8% compared with the last quarter, with notable growth in the accommodation and food-service sectors, the ONS said.
“Labor market input remains well below pre-pandemic peaks but signs of improvement are gaining momentum,” said George Buckley, the chief U.K. and euro area economist at Japanese bank Nomura.
“We can expect a further recovery in response to the ongoing lifting of restrictions, notwithstanding risks to the unlocking process from the rising case numbers of the Indian variant of the virus,” Buckley added.
The positive sign for the British economy helped boost the pound /zigman2/quotes/210561263/realtime/sampled GBPUSD -0.7194% , which rose near 0.5% against the dollar to trade higher than $1.42, before slipping back. That was the highest level the pound has reached since February, and only the second time it’s breached $1.42 since April 2018.
The strong employment data were met by cheers from the U.K. stock market. The FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX +0.42% , the index of London’s top stocks by market capitalization, rose 0.2%.
Investor sentiment remains upbeat, looking past last week’s selloff driven by U.S. inflation concerns, as the focus remains on the economic reopening of countries that have battled back the worst of the COVID-19 pandemic.
“European bourses have powered higher out of the starting blocks on Tuesday, boosted by the Fed’s promise of low rates for longer and upbeat U.K. jobs data,” said Sophie Griffiths, an analyst at Oanda.
“The FTSE is holding comfortably above the key 7,000 level,” Griffiths added. “Robust jobs data and reopening optimism is overshadowing concerns over the Indian COVID-19 variant, which is spreading rapidly.”
Some key travel and tourism stocks, which have been sensitive to developments in the COVID-19 pandemic and government restrictions, lifted in London. Shares in International Airlines Group /zigman2/quotes/208070069/delayed UK:IAG +1.89% — which owns British Airways — climbed alongside low-cost carriers Ryanair and easyJet /zigman2/quotes/202825892/delayed UK:EZJ +2.05% . InterContinental Hotels Group’s /zigman2/quotes/202865596/delayed UK:IHG +1.93% stock also rose.
Shares in Vodafone /zigman2/quotes/202484985/delayed UK:VOD +3.40% sank 6.5%, after the telecommunications giant missed analyst expectations for full-year earnings, despite returning to profit to the tune of €536 million ($655 million) in the 12 months to the end of March after a €455 million loss in the year prior.
Imperial Brands /zigman2/quotes/208789104/delayed UK:IMB -0.83% stock rose 1.5%, after the tobacco group reported a solid first half of its fiscal year and said it was on track to deliver its full-year targets. Revenue rose 6% to £15.5 billion ($22 billion) in the six months to the end of March, driven by strong growth in next-generation products like vaping — which have previously faced headwinds.