UK Labour Market: some signs of weakness but interest rate screw has further to turn
- The employment rate came in at 75.5%, versus 75.7% in the three months to June
- Unemployment came in at 4.3%, versus 4.2% in the three months to June and in line with market expectations (Trading Economics)
- Economic Inactivity increased to 21.1%, versus 20.9% in the three months to June
- Annual wage growth came in at 7.8%, the same as the three months to June and in line with market expectation (Trading Economics)
Nicholas Hyett, investment manager at Wealth Club, commented: “These numbers show some signs the UK labour market could be softening a touch, with a modest increase in unemployment. Add that to recent weakness in UK PMIs, and impending job losses from Wilko’s high profile closure and you can see why suggestions are starting to emerge that the Bank of England can pause future interest rate rises.
However, we suspect that in reality this is too little and too early to change the underlying narrative. Hawks will argue that inflation remains an ingrained problem within the UK. Wage growth remains strong, rising ahead of wider inflation, and government forecasts suggest CPI will tick up again in August. We think that means the Bank of England will add a few more turns to the interest rate screw before declaring it’s job done.”