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On Tuesday, the Office for National Statistics reported that pay growth in the UK slowed in the three months leading up to July, while the unemployment rate reached a six-month low.
The unemployment rate decreased to 4.1% from 4.2% in the previous quarter, aligning with economists' forecasts. This decline indicates a modest improvement in the job market.
Average earnings growth fell to 5.1%, marking a two-year low. When including bonuses, the annual growth rate stood at 4%. The data also revealed that the estimated number of job vacancies dropped by 42,000 to 857,000 for the period from June to August. This decline represents the 26th consecutive quarter of falling vacancies, although the current number remains above pre-Covid levels.
In addition, the number of payrolled employees decreased by 6,000 between June and July, though it increased by 203,000 year-on-year.
Liz McKeown, Director of Economic Statistics at the ONS, commented on the figures, noting that total pay growth has significantly slowed due to one-off payments made to many public sector workers in June and July of the previous year. Basic pay growth also continued to decelerate, though at a slower pace. The data shows that while employee numbers grew over the latest quarter, annual growth has moderated. There was also a decrease in self-employed individuals and a reduction in both those actively seeking jobs and those not available to start work.
Ashley Webb, UK Economist at Capital Economics, noted that while the easing in wage growth might be welcomed by the Bank of England, it is unlikely to significantly influence the upcoming September policy meeting. It is anticipated that the Bank will maintain its current stance in September and may consider a 25 basis-point rate cut in November.
Peter Arnold, EY UK Chief Economist, stated that the latest release did not introduce major new insights. According to the EY ITEM Club, pay growth is gradually declining from elevated rates, and while labor market conditions are less tight than last year, they remain relatively stringent by historical standards. The EY ITEM Club anticipates that the Monetary Policy Committee will adhere to the gradual rate cuts previously indicated, with the Bank Rate expected to remain at 5% following next week’s meeting.
