06:15 AM EST, 02/18/2025 (MT Newswires) -- Tuesday's United Kingdom labor market report paints a slightly better picture of the labor market than Deutsche Bank thought.

The jobless rate stayed put at 4.4%.

Employment gains remained in positive territory -- despite the rise in redundancies. High-frequency data from HMRC suggests some pick up in momentum too with payrolls rising by 21,000 -- its first positive print since October 2024, with the private sector adding nearly 21,000 jobs -- its first gain since September 2024. Pay growth -- AWE Regular Pay -- edged higher to 5.9%, with AWE Private Sector Pay pushing higher to 6.2% (three-month/year-on-year), said Sanjay Raja chief U.K. economist at Deutsche Bank.

If you believe the Labour Force Survey (LFS) data, the U.K. labor market is creaking but not cracking, stated Raja. Some slack is emerging, but the bank isn't seeing a worrying spiral in unemployment -- just yet.

That said, survey data remain weak, he added. Given the issues surrounding the LFS, Deutsche Bank remains vigilant to the survey data. On wages, some tempering of wage growth is likely over the coming quarters -- despite the astonishingly strong rates recorded in the official AWE data. The Bank's Agents point to private sector pay settlements tracking around 3.7% this year. Other pay surveys suggest some downside.

Deutsche Bank expects pay growth to slow further as the U.K. gets past the April bump in the National Living Wage increase.

Tuesday's surprise gains in LFS employment and HMRC payrolls will give the Bank of England's Monetary Policy Committee more time to assess the labor market and demand side of the economy, especially following the upside to Q4 2024 gross domestic product investors saw last week, added the bank.

To be sure, to see more normalization in the labor market. The rise in employer National Insurance Contributions (NICs) will almost certainly come at a price. Survey data remains consistent with at least a few-tenths increase in the unemployment rate over the coming quarters.