UK unemployment climbed to its highest level in almost five years and wage growth eased, cementing the case for a widely expected Bank of England interest-rate cut later this week.
The jobless rate rose to 5.1% in the three months through October, up 0.1 percentage point on the previous period and the highest since the start of 2021, the Office for National Statistics (ONS) said on Tuesday. It was in line with the expectations of economists.
Wage growth excluding bonuses edged down to 4.6% from 4.7%, falling to the lowest since early 2022, with private-sector pay slipping below 4% for the first time since 2020. While those were slightly above forecasts, tax data for November showed the number of employees on payrolls falling by a larger-than-predicted 38,000.
The figures were the first of a raft of key data that may tip the UK central bank into resuming its interest-rate cutting cycle on Thursday after skipping a move in September and November.
While some rate-setters remain concerned about sticky price pressures, the data will add to evidence that the economy lost momentum as businesses and consumers braced for tax rises in Chancellor of the Exchequer Rachel Reeves’ widely leaked Nov 26 budget.
“Another rise in the unemployment rate combined with a step down in private sector pay growth and a looming sharp slowdown in inflation nails on a rate cut on Thursday,” said Thomas Pugh, chief economist at RSM UK. “But at least some of recent weakness in job growth is likely due to budget chaos.”
The pound remained steady against the dollar at US$1.3369 following the data. Money markets trimmed bets on BOE easing slightly, but still see one quarter-point cut this week followed by at least one more next year.
While markets put the odds of a move this week at almost 90%, Bloomberg’s survey shows economists expect a tight 5-to-4 decision in favour of a cut.
Governor Andrew Bailey is likely to be the key swing voter and has wanted to see more evidence of inflationary pressures subsiding before backing another rate cut. Fresh data tomorrow is expected to show inflation edged down to 3.5% in November.
Tuesday’s jobs report also showed:
- Average regular pay growth of 4.6% over the year was driven by public sector pay, which rose by 7.6%, compared with 3.9% for the private sector.
- The rise in public sector regular pay was the fastest rate since ONS records began in 2001. The sharp increase was due to the timing of pay rises this year, as they were awarded earlier than in 2024
- Vacancies fell again by a much reduced 2,000 in the three months to November
- Real annual wages, adjusted for CPI inflation, grew 0.9% in the three months to October, up from 0.8% in the previous period
- The number of employees on payrolls has fallen more than 187,000 since Labour’s first budget
- Youth joblessness rose to 13.4%, the highest in over a year. Almost 550,000 workers aged 18 to 24 were unemployed in October, the largest number since 2015
- Redundancies rose by 156,000 in the three months to October, the highest level since the three months to February 2021, in the pandemic
The labour market has weakened this year after Reeves hit businesses with higher employment costs in her first budget. While firms avoided a repeat of the major tax hikes at last month’s budget, they are still facing the prospect of a higher minimum wage next year and a strengthening of employment rights.
“The overall picture continues to be of a weakening labour market,” said Liz McKeown, ONS director of economic statistics. “The number of employees on payroll has fallen again, reflecting subdued hiring activity, while firms told us there were fewer jobs in the latest period.”
Source: theedgemalaysia