12 November 2024
If you are covering the latest UK labour market statistics, please see the following comment from Lindsay James, investment strategist at Quilter Investors:
“ONS jobs data out this morning provide further evidence that higher interest rates are taking a toll. While the UK labour market is still managing to tick stubbornly along, both the unemployment rate and employee annual wage growth have seen an uptick.
“Annual growth in employees’ average regular earnings (excluding bonuses) fell slightly to 4.8% from July to September 2024, down from 4.9% in June to August. However, annual growth in total earnings (including bonuses) rose to 4.3% from 3.8%, though this was largely due to one off civil service payments.
“Wage growth has been a real sticking point for the Bank of England, and though it remains well above the Bank’s 2% inflation target and this uptick will be unwelcome as far as the Bank is concerned, it is likely we will see a marked slowdown in the coming months. The changes announced at the recent budget will see the government’s coffers receive a major boost from the increase in employer national insurance contributions from April 2025. While the government has not directly placed the tax burden on working people, the higher cost to business is very likely to need to be passed on to employees in one form or another, and we can expect to see a significant slowdown in employee pay increases as a result.
“Meanwhile, the unemployment rate has seen a bigger uptick than had been expected, rising to 4.3% from July to September from 4% in June to August. Despite the challenging circumstances of late, the unemployment rate had remained relatively stable in the UK, hovering closely around 4%, but today’s figure bucks the trend slightly. However, the broader labour market has continued to cool, with the number of payrolled employees down 9,000 between August and September 2024, and up by just 136,000 annually from September 2023 to September 2024.
“The Bank of England announced another 0.25% interest rate cut last week, leaving the base rate at 4.75%. However, the pace of future cuts is looking much less certain than it once was. Expectations for cuts have been scaled back considerably, and rates are now not expected to fall below 4% in 2025. Wage growth and unemployment will remain high on the Bank’s agenda, and we are likely to see a continuation of the slow and steady approach it is currently taking.”
