UK Jobs Market Weakens as Wage Growth Stays High
Britain’s labour market continued to weaken in July, according to official data. Employment fell for the sixth consecutive month, and job vacancies declined again. However, wage growth remained strong, highlighting why the Bank of England (BoE) remains cautious about cutting interest rates.
Labour Market Cooling Despite Policy Split
The Office for National Statistics (ONS) reported on Tuesday that the figures point to a steady cooling in hiring. This comes as BoE policymakers remain divided over the risks of slower employment growth versus rising inflation pressures.
Payroll Employment Continues to Decline
Tax office data showed that the number of employees on company payrolls fell by a provisional 8,000 in July compared to June. This extends a run of monthly declines that began in February.
The drop in June was revised to 26,000, less than the 41,000 originally reported. Employers have cited an increased tax introduced in April by Finance Minister Rachel Reeves as a factor weighing on hiring decisions.
Wage Growth Remains Strong
Private sector basic wage growth edged down to 4.8% in the three months to June. However, average weekly earnings across the UK, excluding bonuses, rose by 5.0%. This is well above the roughly 3% rate seen as consistent with the BoE’s 2% inflation target.
Economists surveyed by Reuters had mostly expected annual wage growth to remain at 5.0%, matching the pace of the previous three months.
Vacancies at Lowest Level Since 2021
The number of job vacancies dropped by 44,000 in the three months to July, bringing the total to 718,000 — the lowest level since the three months to April 2021.
BoE Rate Cut Decision Remains Tight
Last week, the Bank of England cut interest rates from 4.25% to 4% after a narrow 5-4 vote by its Monetary Policy Committee.
