14 November 2023
If you are covering the labour market statistics from the ONS, please see the following comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
"Today’s labour market statistics from the ONS paint a multifaceted picture of the UK’s economic landscape and one that makes the future of interest rates harder to predict. Due to increased uncertainty around the Labour Force Survey the ONS has used alternative estimates for July to September which show the employment rate, a crucial indicator of economic health, has showcased a 0.1% change, signalling a slightly declining workforce environment against a backdrop of higher interest rates. Meanwhile, the unemployment rate has remained largely unchanged at 4.2%, which is yet to reflect the broader economic pressures the UK currently faces.
"In a detailed breakdown, the estimated number of pay rolled employees in the UK for October 2023 has increased by 33,000 employees since last year. This resilience is a testament to the UK's adaptive labour market in the face of mounting external pressures. However, the ONS reports that the average total pay growth, including bonuses, stands at 7.9%, with the regular pay growth, excluding bonuses, dipping slightly to 7.7% for the period.
"This small deceleration in regular pay points to the impact of previous interest rate decisions by the Bank of England, which currently holds at 5.25%. These decisions are closely intertwined with the ongoing inflation rates and the cost of living crisis, which continue to pose substantial challenges for wage negotiations and employment stability. This slight decline will be a positive for the Bank of England which is set on reducing inflationary pressures.
"However, with geopolitical tensions and the imminent election casting long shadows, the economic forecast remains overshadowed by uncertainty. The conflict in the Middle East adds another layer of complexity, potentially exerting inflationary pressure, thus complicating future fiscal policymaking.
"As businesses navigate these turbulent times, we will likely see a cautious approach to wage increments and staffing levels in the future. While recession this year has been narrowly avoided but this will feel like a technicality for many businesses as it will certainly have felt like a recession and redundancies may begin to feed through.
"The proportion of those economically inactive is another focal point, remaining largely unchanged at 20.9%. A major reduction here would suggest a successful government push towards increasing labour market participation amidst the cost-of-living surge.
"These figures will be pivotal in shaping policy direction and investor sentiment as the nation grapples with the dual challenge of stimulating growth and curbing inflation."
