2 weeks ago
UK labour market cools as wage growth slows, vacancies fall
Something is slowing down in the UK's job market.
The money people earn from work is growing more slowly than before.
The number of jobs being advertised is also going down.
This shows that the economy is cooling off.
The Bank of England watches these numbers very closely.
They help the Bank decide whether prices in the shops are rising too fast.
But energy prices have gone up a lot, which could push prices higher.
So the Bank has a tricky decision to make.
It does not want to damage the jobs market, but it also wants to keep prices steady.
Everyone is waiting to see what the Bank will do next.
Private-sector regular wage growth slowed to 2.8% year-on-year in the three months to June, the weakest pace since October 2020.
Job vacancies fell to 707,000 in the three months to July, the lowest level in more than five years.
The unemployment rate held at 4.9%, against economists' expectations for a decline to 4.8%.
Overall annual earnings growth excluding bonuses stood at 3.5% in the second quarter, slightly above the 3.4% expected.
The Bank of England faces a policy dilemma between a cooling labour market and inflation risks from an energy price shock linked to the Iran war.
- Who
- The Office for National Statistics, UK workers and employers, and the Bank of England, which is assessing the data alongside economists.
- What
- The UK labour market cooled further, with private-sector wage growth at its weakest since 2020 and vacancies at a five-year low.
- Where
- United Kingdom
- When
- The second quarter covering the three months to June, with vacancies reported for the three months to July; data released on Tuesday.
- Why
- Slowing wage growth and falling vacancies point to a cooling economy, feeding into the Bank of England's assessment of inflation pressures after an energy price shock linked to the Iran war.
Caution on further rate action
Vigilance on inflation risk
Bank of England monetary policy direction
Caution on further rate action
The cooling labour market — the weakest private-sector wage growth since 2020 and a five-year low in vacancies — strengthens the case for the Bank of England to be cautious and hold off on further rate moves.
Vigilance on inflation risk
The inflation outlook and potential pass-through of higher energy costs from the energy price shock linked to the Iran war remain key factors, meaning the Bank of England may need to consider further interest rate hikes.
Key facts
- Private-sector regular wage growth
- 2.8% year-on-year in the three months to June — weakest since October 2020
- Job vacancies
- 707,000 in the three months to July, down from 711,000 — lowest since April 2021
- Unemployment rate
- 4.9%, held steady (economists expected 4.8%)
- Overall earnings growth (excluding bonuses)
- 3.5% in the second quarter, above the 3.4% expected
- Data source
- Office for National Statistics, released Tuesday
- Market pricing
- One 25-basis-point Bank of England interest rate hike priced in by end of 2026
- ONS comment
- Liz McKeown: 'The labour market picture is little changed overall, with some softening still evident'
Quotes
Liz McKeown
ONS Director of Economic Statistics
“"The labour market picture is little changed overall, with some softening still evident."”
firstpost.com
Sources
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