Home Business News UK labour market: Does weakness mean a rate cut is imminent?

UK labour market: Does weakness mean a rate cut is imminent?

11th Jun 24 8:40 am

Unemployment has risen to its highest in more than two years as the jobs market has weakened and official figures shows that wage growth remains strong.

In the three months to April unemployment rose to 4.4% compared to 4.3% in the three months to March, according to the Office for National Statistics (ONS).

Economic Inactivity rose quarter-on-quarter to 22.3% whilst the annual wage growth came in at 5.9%, versus 5.7% in the three months to March and market expectations of 5.7% (Trading Economics).

The ONS said, “This month’s figures continue to show signs that the labour market may be cooling, with the number of vacancies still falling and unemployment rising, though earnings growth remains relatively strong.”

Jake Finney, economist at PwC UK, said, “The latest ONS data presents a headache for the Bank of England.

“A broad set of indicators suggests that the labour market is cooling but pay growth has not fallen to the extent they would like to see.”

Nicholas Hyett, Investment Manager at Wealth Club, said, “Falling employment, rising unemployment and rising economic inactivity do not paint a pretty picture of the UK labour market. Falling vacancies makes those numbers particularly concerning, suggesting there is a genuine lack of demand for staff.

There are some redeeming features – real wage growth for instance remains north of 2% year-on-year – but this is, nonetheless, precisely the kind of sign the Bank of England has suggested it’s been waiting for to start cutting interest rates.

Counterintuitively that would come as a relief to houseowners, potentially a rare bit of good news for the government in a so far lacklustre election campaign. In reality though it probably comes too late to influence house prices ahead of polling day.”

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