Britain’s job market shows clear signs of weakness as unemployment climbs to 5.1%, the highest level since January 2021. In the three months to October, the jobless rate rose from 5.0% to 5.1%, aligning with forecasts from City economists and the Bank of England.
November also brought softer employment, with payroll employees dropping by 38,000, according to the Office for National Statistics. The October payroll tally declined by 22,000 as well.
Wage growth cooled alongside the labor slowdown. When bonuses are included, earnings growth slipped from 4.9% to 4.7%. Excluding bonuses, wages rose 4.6% in the year to October, down from 4.7% previously.
Payroll data indicated a second consecutive month of weaker job listings, reinforcing the narrative of a cooling labor market. These developments come just before the Bank of England’s imminent rate decision, with policymakers divided over a potential fourth rate cut this year.
Some MPC members may be drawn to ease borrowing costs given the soft hiring picture and easing wage gains. Depending on the incoming data, Governor Andrew Bailey could also lean toward supporting a cut to 3.75%.
Ahead lies November’s consumer price inflation figures, which will add further clarity to the inflation trajectory that the Bank is monitoring. The broader picture this year shows a gradual slowdown in the UK labor market, as employment and hiring in lower-paid sectors have been dampened by the April rise in employers’ National Insurance contributions.
Liz McKeown, director of economic statistics at the ONS, summarized the situation: the labor market is weakening overall. Payroll employment has declined again, signaling subdued hiring, while employers report fewer available positions in the latest period.
But here’s where it gets controversial: with wages cooling and vacancies shrinking, will the Bank of England push ahead with a cut even if inflation remains stubborn, or will they wait for stronger evidence before easing policy further? And this is the part most people miss—could a slower jobs market actually reduce inflation faster than anticipated, potentially allowing for a larger, more sustained rate cut later? What’s your take on the balance between supporting growth and keeping price stability in the current environment?
