13 August 2024
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:
“The latest UK labour market statistics mark the first of three all-important data points due out this week which the Bank of England is sure to be keeping a watchful eye on.
“The UK labour market, inflation and GDP data are expected to be somewhat of a mixed bag this week, and the unemployment figure has presented the first surprise. The labour market has been cooling in recent months and a further increase in the unemployment rate had been on the cards, but this morning’s data show it decreased to 4.2% in April to June, down from 4.4% in the three months to May. The number of payrolled employees also increased by 14,000 between May and June 2024 and rose 227,000 between June 2023 and June 2024. While this suggests some unexpected strength in the labour market, it is worth taking these figures with a pinch of salt as the ONS has given a clear warning that the volatility of its Labour Force Survey estimates may mean they do not paint an entirely accurate picture.
"Meanwhile, this morning’s wage growth print will be welcomed by the BoE. Annual growth in employees’ average regular earnings (excluding bonuses) fell to 5.4% in April to June 2024, while annual growth in total earnings (including bonuses) fell to 4.5%, marking the lowest wage increase seen for two years. Though wage growth is heading in the right direction as far as the BoE is concerned, for now it continues to outpace inflation and in real terms, regular earnings are currently rising 3.4% which could help buoy the economy alongside increased consumer confidence following the first rate cut.
“Another round of data is due ahead of the Bank’s next interest rate decision in September which could sway things, but for now, this modest fall in wage growth may provide some reassurance that inflation pressures are relatively well contained and may therefore allow the Bank of England to continue cutting rates in the coming months, though it will continue to closely watch the unemployment rate. Markets have been pricing in a more aggressive path of rate cuts in the US than the UK, and we will likely have a clearer picture of what the Bank of England’s next steps could be by the end of the week once we have a better idea of the current state of the economy."
