10 September 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:
“All eyes are on UK earnings data from the Office for National Statistics this morning, not only because the average total earnings figure is expected to decide the state pension uplift for the coming tax year, but also because of how much of a role it will play in the Bank of England’s interest rate decision making process.
“The latest figures reveal annual growth in employees’ average regular earnings (excluding bonuses) fell to 5.1% in May to July 2024, while annual growth in total earnings (including bonuses) fell to 4%, marking the lowest wage increase seen for two years.
“Markets have been pricing in a relatively slow pace of cuts for the Bank of England, and the relatively persistent wage growth has been one of the primary reasons. Though wage growth is coming down, it remains significantly higher than the Bank’s 2% inflation target. In real terms, average regular earnings are rising by 2.9%. While this may help buoy consumer confidence, it will still be of some concern to the BoE.
“The unemployment rate decreased to 4.1% in May to July, following a fall to 4.2% in April to June. Generally speaking, however, the UK labour market does still appear to be cooling – albeit not as quickly as had been expected. The number of payrolled employees fell by 6,000 between June and July 2024 and rose 203,000 between July 2023 and July 2024, down from the 227,000 reported between June 2023 to June 2024. The ONS once again gave a warning that the volatility of its Labour Force Survey estimates may mean the figures supplied are not entirely representative of the current labour market, so we must continue to take these figures with a pinch of salt. The ONS data is also a lagging indicator, and yesterday's report from BDO suggested that in August, the jobs market suffered its worst month in more than a decade as interest rates have started to bite.
“The Bank of England’s next interest rate decision is now just over a week away, and today’s data, alongside the inflation and GDP prints due out before it meets, will no doubt play a major role in whether it opts to reduce rates further or hold for now. Markets have been pricing in a more aggressive path of rate cuts in the US than the UK, and unless something remarkable appears in either of these prints it is unlikely we will see this change.”
