10 June 2025
If you are covering the latest UK labour market statistics from the Office for National Statistics, please find below a comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“Economic growth may be appearing robust on the surface through the first part of the year, but today’s labour market statistics highlight there is a slowdown well and truly underway. The unemployment rate ticked up to 4.6% and currently sits at a three year high, while payrolled employee numbers fell by a staggering 274,000 year on year according to early estimates for May, with the decrease a more confident yet still significant 115,000 for April’s yearly comparison.
Indeed, with increased national insurance contributions on businesses now bedded in, the employment picture is deteriorating as companies look to scale back hiring, and in some cases cut their UK workforce significantly. Just last month we saw Santander announce it was cutting jobs and freezing salaries in its commercial banking arm, highlighting the decisions big companies are taking at a time when the increased tax burden is being put upon them.
“Growth in regular pay, excluding bonuses, is also starting to slow, with it falling to 5.2%, as did total pay, including bonuses, which also slipped back to 5.3%. With inflation sitting at 3.5% and expected to remain above target for a few more months, we may see wages fail to keep up with price rises again soon and exacerbate some of the cost of living pressures still being felt by consumers.
"This is all underpinning what is a difficult task for the Bank of England. With wage growth slowing but inflation rising, it will not want to pull the trigger on rate cuts too soon and put extra sails into the inflation charge. This perhaps explains Andrew Bailey’s recent tone that rate cuts will be slow and cautious, as despite what is an obviously slowing economy, many risks remain present in the world that could easily allow inflation to climb higher again, principally an escalation of the trade war come July when Donald Trump’s 90-day pause on reciprocal tariffs ends. We will need to see a significant further weakening of the labour market here in the UK before the Bank of England chooses to up the pace of its rate cuts.”
