Lindsay James, investment strategist at Quilter Investors, comments on the latest UK labour market statistics:
“ONS jobs data out this morning provide the Bank of England with a final snapshot of the UK labour market before its next monetary policy meeting. While higher interest rates have begun to take a toll, there are still some signs of progress in this report.
“The latest figures show that annual growth in employees’ average regular earnings (excluding bonuses) fell to 4.9% from June to August 2024, down from 5.1% in May to July. Similarly, annual growth in total earnings (including bonuses) fell once again to 3.8% from 4%, marking the lowest wage increase in over two years.
“Wage growth has been a persistent challenge for the Bank of England. Although it is moving in the right direction, the pace remains well above the Bank’s 2% inflation target. This morning’s figures indicate that average regular earnings are rising by 2.7% in real terms. While wage growth isn’t falling as quickly as the Bank might like, the fact that it hasn’t increased suggests we might see a further base rate cut on 7th November.
“Meanwhile, the unemployment rate has continued to ease, falling to 4% from June to August, down from 4.1% in May to July. Although unemployment has been relatively stable in the UK recently, the broader labour market is cooling. The number of payrolled employees dropped by 35,000 between July and August 2024, and increased by just 165,000 annually from August 2023 to August 2024, compared to the 203,000 rise from July 2023 to July 2024.
“With only a few weeks until the next Bank of England interest rate announcement, today’s figures, along with last week’s GDP data and tomorrow’s inflation number, will play a vital role in the monetary policy committee’s decision-making. Labour’s first budget will also take place before the Bank’s MPC meeting, so the Bank will closely monitor market reactions and potential economic impacts.
“Though we could see another rate cut at the next meeting, it is seeming increasingly likely that the Bank of England will continue on its ‘slow and steady’ path with a 0.25% cut at most.”
