UK jobs data signals potential interest rate cuts in November
- UK wage growth has slowed significantly, with regular average earnings growth at a two-year low of 5.1% as of July.
- The unemployment rate has slightly decreased to 4.1%, but job vacancies have also fallen, indicating a weakening labor market.
- Experts predict that the Bank of England may implement another interest rate cut in November due to these trends.
Recent data from the UK labor market indicates a significant slowdown in wage growth, with regular average earnings growth dropping to 5.1% for the three months ending in July, the lowest in two years. Total pay growth, which includes bonuses, fell to 4%, marking the lowest level in nearly four years. This decline is particularly pronounced in the private sector, where average weekly earnings decreased to 4.9% from 5.3%. The Bank of England's Monetary Policy Committee (MPC) has been closely monitoring wage trends as part of its strategy to manage inflation, which recently edged up to 2.2% in July. The MPC had previously cut interest rates to 5% in August, and experts suggest that the latest wage data supports the possibility of another reduction to 4.75% by the end of 2024. Despite a slight decrease in the unemployment rate to 4.1%, the overall health of the jobs market appears to be weakening, with job vacancies falling by 42,000 to 857,000 in the three months leading to August. Additionally, real-time PAYE figures indicate a drop of 59,000 payrolled workers between July and August, suggesting a loosening of labor market conditions. Experts believe that the combination of slowing wage growth and declining vacancies will not hinder the Bank of England's easing cycle, with a potential interest rate cut anticipated in November. The current economic landscape reflects ongoing challenges, but the data may provide the necessary support for further monetary policy adjustments.