The Office for National Statistics said today (12 December) that unemployment had remained unchanged between August and October, staying at 4.2%, as the historically tight labour market continued.
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Wage growth saw its 17th month of decline, coming in below expectations of 7.4%, and is set to influence the Bank of England in its Monetary Policy Committee meeting to set interest rates later this week.
Richard Carter, head of fixed interest research at Quilter, argued that following the data, the “future of interest rates is becoming ever harder to predict”.
“This dip in pay suggests the Bank of England’s previous interest rate decisions are beginning to have the desired effect and it will likely feel vindicated to continue to hold rates higher for longer as a result.
“Though today’s figures suggest another step has been taken in the right direction, the Bank will be keen to see a significant slowdown in wage growth before it begins to contemplate the possibility of cutting interest rates.”
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Pay grew fastest in the finance and business services sector, the data revealed, as it rose by 8.3% over the quarter.
“This is now the longest period of decline on record, longer than in the immediate aftermath of the 2008 downturn,” said Darren Morgan, director of economic statistics at the ONS.
The ONS also found that the unemployment rate fell to 3.5% in the spring and rose to 3.8% in the three months to August in its recent ‘experimental’ data from the Transformed Labour Force Survey.
However, Quilter’s Carter warned that the new data appeared “very difficult to trust right now”, but added that the findings will still make the BoE’s job “even harder”, potentially allowing it to continue to pursue its higher for longer narrative.
