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UK unemployment rate up but pay growth rises faster than expected

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The UK's unemployment rate increased to 3.8 percent in the three months leading up to February, according to official data showing a faster-than-expected acceleration in salary increases.

The data from the Office for National Statistics (ONS) shows an increase in the number of people without a job for longer than six months caused the unemployment rate to increase from 3.7 percent to 4.0 percent.

The rate increased despite part-time employees and self-employed workers being the main drivers of an increase in employment.

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The amount of people seeking unemployment benefits—which increased by 28,200 in March—provided another indication the unemployment rate was about to be under pressure to rise.

The data also showed in the three months leading up to March, there were 1.1 million fewer vacancies, a decrease of another 47,000.

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The ONS said this reflected "uncertainty across industries, as survey respondents continue to cite economic pressures as a factor in holding back on recruitment".

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However, in the three months up to February, total pay—including bonuses—grew at an annual pace of 5.9 percent.

This was higher than the 5.7 percent recorded the month before and occurred as energy-related inflation was still at a 40-year high of above 10 percent.

At the moment, the inflation rate is 10.4 percent.

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At 6.6 percent, regular salary growth remained constant.

As the cost-of-living issue develops, the rate of salary increases is a highly watched indicator - and not just for squeezed consumers.

The NHS is one of the many sectors still suffering from pay strikes, and the Bank of England has called for salary restraint.

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It has been concerned that raising pay to keep up with inflation just increases pressure on prices by boosting demand.

According to the ONS data, as additional settlements were reached, the difference between public and private sector wage growth continued to close.

Chancellor Jeremy Hunt said of the figures: "While unemployment remains close to historic lows, rising prices continue to eat into pay cheques which is why halving inflation this year is one of our top economic priorities.

"To help families in the meantime, we are making work pay with a record increase in the National Living Wage while providing cost of living support worth an average of £3,300 per household this year and last, funded through windfall taxes on energy profits."

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SourceSky News

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