The latest UK employment data reveals a mixed picture, with signs of a slowdown in the labour market but persistent wage pressures, leaving the Bank of England in a delicate position ahead of its meeting on September 19.
Key points:
- The UK employment rate for people aged 16-64 is estimated to be 74.8% in May-July 2024, It rose 0.5 percentage points on a quarterly basis, but was down 0.1 percentage points compared to last year.
- The unemployment rate was estimated at 4.1%, down 0.2 percentage points. On a quarterly basis, down 0.2 percentage points year-on-year.
- The economic inactivity rate was 21.9%, down 0.3 percentage points quarter-on-quarter, but up 0.3 percentage points year-on-year.
- The number of job openings decreased by about 42,000 jobs on a quarterly basis to 857,000 jobs in the period from June to August 2024. This represents the 26th consecutive quarterly decline in job openings.
- The annual growth in average total employee wages was 4.0% in the period from May to July 2024, while the growth in regular wages was 5.1%.
- In real terms (adjusted for inflation), total wages rose by 1.1% and regular wages by 2.2%.
- There were 42,000 working days lost due to labour disputes in July 2024, with most strikes in the health and social work sector.
Link to September Labour Market Overview from the Office for National Statistics
Market Reactions
British pound against major currencies: 5 minutes
Comparison between the British pound and major currencies Chart by TradingView
Market reactions:
Initial market response suggests that although the data was mixed, it was seen as marginally positive for sterling against all major currencies, especially the ‘safe havens’. Overall, the numbers were somewhat more positive than markets had expected, with the low unemployment rate and continued high wage growth likely to weigh heavily on market sentiment.
However, the pound peaked within two hours of the statement, and the situation changed dramatically, especially the Swiss franc and the Japanese yen. This is the behavioral trend that is noted in our event guide.
This may indicate some caution among investors about the UK economic outlook, and/or that the risk-off sentiment seen during Tuesday’s session is weighing more heavily on GBP sentiment.
This market reaction is in line with analysts’ views that While the labour market is showing signs of slowing, it is unlikely to reach a point where the Bank of England would consider cutting interest rates immediately.With the next round of easing likely (possibly a 25bp cut) in November 2024.