17 October 2023
If you are covering the latest UK earnings and employment and average weekly earnings statistics, please see the following comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“While we have to wait a week for delayed UK unemployment data, this morning's labour market figures show the number of payrolled employees increased by 1.2% in September compared to the year prior, a rise of 369,000 employees. The UK labour market has remained extremely resilient despite the ongoing pressures, and though we await the full details, this trend is expected to continue for now.
"With the Bank of England last month choosing to hold the interest rate at 5.25% in the face of falling inflation, this data, alongside next week’s delayed figures, will play a significant role in its rate decision on the 2nd November. However, the worrying conflict in the Middle East may mean that inflation returns to an upward trajectory making future decisions on rates that much harder.
“Despite the current pause in rate rises, businesses will still be finding the going very tough. As a result of higher interest rates it may lead to a plateauing of wage growth, given that businesses will not have the surplus funds to sanction significant salary increases. Furthermore, with the continued financial uncertainty, employees might tread cautiously when it comes to negotiating for pay hikes for fear of becoming too expensive to keep on. Similarly, businesses could opt to stay lean and not take on too many more staff with future economic uncertainty still prevalent reducing the number of roles available. Therefore, despite the positive momentum in wages over the past year, a deceleration seems likely in the near future. Presently, the ONS data indicates growth in employees' average total compensation (inclusive of bonuses) stood at 8.1%, and the uptick in regular pay (exclusive of bonuses) remained steady at 7.8% in June to August 2023.
“All eyes will be on next week’s data and not only will the unemployment rate be closely watched, but it is also hoped that the percentage of those economically inactive will have seen a further reduction. If this is the case, it would come as a real positive for the government as it continues to try and help encourage people back to work. However, in light of the cost-of-living crisis, this may end up happening naturally in the coming months as belts have to tighten."
