Further interest rate hikes are becoming more unlikely as the latest data suggests an economic slowdown is underway in the UK.
The Office for National Statistics reported today (14 November) that wage growth excluding bonuses had eased to 7.7% in the three months to September, down from 7.9%.
Job vacancies also contracted by 58,000 over the quarter to 957,000. Unemployment was flat on last month at 4.2% as the ONS continues to trial a new calculation method.
The update front-runs tomorrow’s crucial inflation read-out, which is expected to show a further fall towards the 2% target.
Jake Finney, economist at PwC UK, commented: “The latest labour market data paints a similar picture to last month, with vacancies declining, employment down, and unemployment up.
“While there is some uncertainty around the accuracy of this data release, other indicators also suggest the labour market is gradually cooling, not collapsing.
“For now, wages are growing in real terms, which should herald an end to the worst of the living standards squeeze. However, it is only a matter of time before the cooling of the labour market translates into lower wage growth. For this reason, we are not expecting any significant real wage growth until 2025, when inflation is expected to return to target.”
Finney added that there is nothing in the data today that is likely to prompt the Bank of England to restart its tightening cycle at its next meeting in December.
Danni Hewson, head of financial analysis at AJ Bell, sees the situation facing the Bank of England as finely balanced still.
“There might be big questions being asked about the health of the data itself, but the numbers released today indicate the UK labour market is cruising along despite tricky economic conditions,” she said.
“The big number that will be scrutinised by economists, politicians and central bankers alike is pay growth.
“When adjusted for inflation it means people are finally feeling the benefit in their pay packets and with inflation expected to have cooled significantly last month it is an indication that the worst of the cost-of-living squeeze might be over.
“But there lies the rub. If households are feeling more confident and have a bit more room in the budget they are likely to spend that cash, which could prove inflationary.”