The Office for National Statistics (ONS) revealed that the UK employment rate (for those aged 16-64) was estimated at 74.8% in May to July. This is an increase on the quarter, but lower than estimates of a year ago.
Meanwhile, the UK unemployment rate was estimated at 4.1% in the three-month period, which represents a decrease from the previous quarter, and is below estimates from this time last year.
Turning to wages, the ONS revealed that annual growth in total earnings (including bonuses) was 4%, with the rate impacted by the NHS and civil service one-off payments made in June and July 2023.
However, once adjusted for inflation, the figure was estimated at 2.2% for regular pay and 1.1% for total pay.
According to Susannah Streeter, head of money and markets at Hargreaves Lansdown, with wage growth easing from 4.5% to 4% and the unemployment rate edging down, coupled with above-pre-pandemic vacancy levels, “there is still likely to be some reticence around the table at the MPC for a cut next week”.
Streeter said: “Pay growth is still running at more than twice the rate of consumer price growth and there are still niggles of worry that those high wage bills might be passed on as higher prices for goods and services. With the headline rate of inflation having crept away from target at the last snapshot, some policymakers may still be wary.
“Financial markets are pricing in the likelihood that the bank will keep rates on hold this month at around 72%, although those bets have reduced slightly compared to yesterday. Cuts are looking more likely to be voted for at the meetings in November and December. A lot is likely to be riding on August’s CPI number, due out just a day before the MPC meets.”
Ashley Webb, UK economist at Capital Economics, said: “The further easing in wage growth will be welcomed by the Bank of England as a sign that labour market conditions are continuing to cool. But we doubt this will be enough to prompt a back-to-back 25 basis points (bps) interest rate cut, from 5% to 4.75%, in September.
“We doubt today’s release will move the needle too much for September’s policy meeting. We still think the bank will pause in September before implementing another 25bps rate cut in November.”
Meanwhile, Isaac Stell, investment manager at Wealth Club, said: “The UK’s labour market continues to show little signs of weakening, however the continued moderation in wage growth means that there are no clear reasons that the Bank of England cannot continue on its interest rate-cutting path. Initial market reactions have been muted, with a brief spike in the pound having already dissipated.”
