UK jobs market slowdown shows signs of easing before budget

Wage growth in the private sector slowed to 4.4% in the three months through August

The UK labour market showed further signs of stabilisation in data released on Tuesday (Oct 14), with employers appearing to be past the worst of the shake-out triggered by a £26 billion (S$44.8 billion) payroll tax increase.

The number of employees on payrolls dropped 10,000 in September following a revised increase of 10,000 the month before, the Office for National Statistics said. It was in line with the fall economists had predicted and less sharp than the cuts seen over the summer.

Meanwhile, wage growth in the private sector slowed to 4.4 per cent in the three months through August, the lowest since the end of 2021 and below expectations. However, the figure is well above the 3 per cent or so the Bank of England reckons is compatible with its 2 per cent inflation target. Job vacancies fell just 9,000 in the three months to September.

The figures are likely to fuel the debate at the central bank over whether inflation that has surged to almost double the 2 per cent target could trigger feedback loop by fuelling wage demands that then lead to more price increases.

Policymaker Megan Greene highlighted the risk of second-round effects in a speech on Monday, and markets are all-but ruling out further rate cuts this year. However, others believe the disinflation process remains in tact, potentially leaving the decision with governor Andrew Bailey as the crucial swing voter on the Monetary Policy Committee.

Job cuts in response to tax and minimum-wage increases in April have slowed in recent months, and the loss has been smaller than originally estimated. The figure chime with a key survey from Recruitment & Employment Confederation and KPMG that found the labour market stabilising in September across a number of metrics.

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Economists are officials are now paying more attention to private-sector polls and the payrolls data, which are based on tax records, after a collapse in response rates to the ONS’ Labour Force Survey raised questions about the reliability of official readings. BLOOMBERG