12 December 2023
If you are covering the latest UK labour market statistics, please see the following comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“New statistics from the ONS this morning reveal the UK labour market continues to battle on despite the intense economic pressures it faces. The Bank of England’s next interest rate decision is just days away, and the future of interest rates is becoming ever harder to predict.
“The ONS has continued using its alternative estimates following concerns around the Labour Force Survey, which show the employment rate was largely unchanged on the quarter at 75.7% as the impact of higher interest rates is slowly being realised. Meanwhile, the unemployment rate also remained unchanged at 4.2%. Recent ‘experimental’ data from the ONS’s new Transformed Labour Force Survey suggests the unemployment rate fell to 3.5% in the spring and rose to 3.8% in the three months to August. This new data appears very difficult to trust right now and the ONS has warned against relying on it just yet, but its findings will still make the Bank’s job even harder and potentially give it license to pursue its higher for longer narrative for even longer.
“Payrolled employees in the UK for November 2023 increased by 333,000 compared to the same period last year, showing the remarkable resilience of the UK’s labour market continues for now. However, the ONS reports that average total pay growth, including bonuses, dipped to 7.2% between August and October, while regular pay growth, excluding bonuses, also fell to 7.3% for the period.
“This dip in pay suggests the Bank of England’s previous interest rate decisions are beginning to have the desired effect and it will likely feel vindicated to continue to hold rates higher for longer as a result. Though today’s figures suggest another step has been taken in the right direction, the Bank will be keen to see a significant slowdown in wage growth before it begins to contemplate the possibility of cutting interest rates.
“Elsewhere, the percentage of those economically inactive also remained largely unchanged at 20.9%. The government has been pushing for an increase in labour market participation in an attempt to boost productivity, but we are yet to see a meaningful reduction here.
“Businesses have had to navigate incredibly turbulent times over the past few years, and with political tensions ongoing and an election just around the corner, we can expect them to maintain a cautious approach when it comes to staffing levels and pay increases as we enter the new year. These figures will be pivotal in terms of shaping the Bank’s policy direction going forward.”
