Key points:
- Growth in payrolled employment and a surprise fall in the unemployment rate point to labour market resilience.
- An uptick in wage growth is likely to add to expectations for a Bank of England rate hike.
- Vacancies continued to slide.
The latest figures from the Office for National Statistics (ONS) suggest the UK labour market is finding a floor, echoing the wider economy’s better-than-expected recent performance. Payrolled employment rose by a provisional 13,000 in September after a period of decline, while the unemployment rate unexpectedly fell to 4.7% in the three months to August (though with the usual caveat around data quality).
For Bank of England policymakers, the figures are likely to play second fiddle to the inflation picture, with the groundwork for a November rate hike already laid. At the margin, the latest data is likely to only add to expectations for higher borrowing costs going forward, particularly given an uptick in annual regular wage growth (to 3.7%).
That said, the data also showed a continued slide in vacancies, down 21,000 in the third quarter, pointing to ongoing hiring caution. The ONS said this was centred on smaller businesses and was frequently linked to higher employment costs. Employers await next week’s Budget for greater clarity about the government’s tax plans and what it means for their cost base.
