UK unemployment held at 4.9% in the three months to July while payrolls fell again in August and wage growth slowed further. The data lands ahead of the Bank of England's Thursday rate decision, where policymakers must weigh a cooling labour market against inflation risks from higher energy prices.
British unemployment stayed at 4.9% in the three months to July, below the 5% forecast, while payrolled employment kept shrinking, the Office for National Statistics said Tuesday. The employment rate held broadly steady at 75.1%.
Payrolls and vacancies keep falling
Payrolled employment fell by 26,000 in August, following a revised drop of 19,000 in July, taking the total to 30.2 million. Compared with a year ago, payrolls are down by 145,000. The ONS said the decline has continued a broader two-year trend.
Job vacancies fell to 702,000 in the three months to August, from 706,000 the prior period, the lowest reading since the three months to April 2021. The ONS Vacancy Survey suggests smaller firms may not be recruiting because of higher labour costs, according to Liz McKeown, ONS director of economic statistics: "Vacancies remain at their lowest level outside the pandemic period for more than a decade", she said.
Wage growth eases before Thursday's decision
Total pay growth slowed to 3.9% in the three months to July, down from 4.2% in the prior period — the softest reading since late 2020. Regular pay, which excludes bonuses, grew 3.5%, matching the prior period and in line with economist forecasts.
Public sector regular pay growth ran at 6.3%, against 2.9% in the private sector, a gap the ONS linked to the timing of NHS pay awards.
BoE weighs cooling jobs against energy-driven inflation
The Bank of England meets Thursday with its bank rate at 3.75%. Softer hiring and easing wage pressure would normally support a cautious BoE, but higher oil and energy prices have pushed inflation risk back up the agenda. The BoE is trying to gauge whether higher energy prices caused by the Iran war will interrupt the cooling of wage growth and underlying inflation pressure. That leaves policymakers weighing persistent inflation against a slowing labour market as they decide whether a rate hike is still warranted this year.
Investors were pricing roughly a one-in-three chance of a quarter-point hike on Thursday, with a hike at November's meeting seen as almost certain, followed by another in December. Markets are widely expecting the BoE to hold the bank rate at 3.75% this week, even as pressure builds for tightening later this year.
Sources: Investinglive, Investing.com, Investing.com
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