UK Jobs Market Shows Some Recovery Signs as BoE Mulls Rate Hike

• British workers saw a modest rise in pay growth, with average weekly earnings excluding bonuses increasing by 3.7% in the three months to August, up from 3.4% earlier in the year and above economists’ forecast of 3.6%.
• Private-sector pay growth increased to 3.0% from 2.9%, marking its first rise since the end of 2024. This could strengthen the case for a Bank of England interest rate hike next month.
• There were signs of improvement in the jobs market, as the number of payrolled employees rose by 13,000 in September. The unemployment rate also fell to 4.7%, its lowest level since mid-2025, suggesting the slowdown in hiring may be stabilising.
• Despite these improvements, job vacancies fell from 704,000 to 691,000, dropping below 700,000 for the first time since 2021 and reaching their lowest level, outside the COVID-19 pandemic, since 2014. Smaller businesses were particularly affected by rising employment costs.
• Economists said the labour market remained fragile, with a stronger recovery dependent on Finance Minister John Healey’s upcoming budget. Previous employer tax increases had contributed to weaker hiring, while businesses continue to face elevated labour costs.
• Investors expect the Bank of England to raise its benchmark interest rate to 4% at its November meeting, as policymakers monitor whether higher energy prices linked to the Iran war are creating wider inflationary pressures, including through demands for higher wages. Sterling rose against the US dollar following the data release.

(Source: Reuters)