Unchanged unemployment rate ‘could be enough’ for another interest rate pause

The rate of UK unemployment remained unchanged at 4.2 percent in the three months to August, the Office for National Statistics said.

It comes after official figures last week revealed that wages are outstripping inflation for the first time in nearly two years.

However, the broader jobs market presents a mixed picture. Last week’s figures indicate that pay growth has begun to slow for the first time since January, job vacancies have decreased for the 15th consecutive time, and there was an 11,000 decline in UK workers on payrolls during September.

The latest “experimental” figures had been delayed by a week due to a low response to its labour force survey, and the ONS said it has used extra data sources to estimate the figures.

Darren Morgan, ONS director of economic statistics, said: “Today we have produced a new metric, produced by adjusting our headline survey estimates using robust administrative data sources that we receive from other Government departments. This maintains the accuracy of our key statistics.

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“This is part of our transformation of the way we measure the labour market where we are introducing an improved Labour Force Survey, asking more people in different ways about their employment status.”

Some analysts have said the recent data could “be enough” for the Bank of England to continue with its “pause” on interest rate hikes.

Marcus Brookes, chief investment officer at Quilter Investors commented: “At a time when every data source will be analysed to the nth degree by the Bank of England and investors, it is unfortunate that the ONS had to delay the publication of the employment numbers to today.

“With low response rates to surveys and a new ‘experimental’ data series being used, today’s figures provide a slightly clouded picture of what is happening in the labour market, at a point where we are a very finely balanced point in the rate hiking cycle.”

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Mr Brookes said that looking at the ‘experimental’ data, unemployment in the UK is remaining stable, for now. However, he noted: “The fast rise in interest rates is beginning to bite and we are seeing companies scale back hiring and in some cases shed jobs, with the employment rate falling and unemployment rising gradually in the last three months.

“We know that economic growth in the UK is slowing and could potentially turn negative for the fourth quarter, so today’s data provides further evidence that things may be beginning to roll over.

“For the Bank of England, this may be just enough to continue with a pause at its next interest rate decision, having hit the brakes at its last meeting.”

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