Britain’s labour market showed fresh signs of losing momentum in the second quarter, with private-sector wage growth slowing to its weakest pace since 2020 and job vacancies falling to their lowest level in more than five years.
Britain’s labour market showed further signs of cooling in the second quarter, as private-sector wage growth slowed and the number of job vacancies fell to its lowest level in more than five years, adding to the Bank of England’s policy dilemma.
Private-sector regular earnings rose 2.8 per cent year-on-year in the three months to June, the weakest growth since October 2020, official data from the Office for National Statistics showed on Tuesday.
The slowdown in wage growth is closely watched by the Bank of England because it provides a key gauge of domestic inflation pressures. The figure was in line with the central bank’s forecast published last month.
The labour market data nevertheless weighed slightly on sterling, as the unemployment rate held at 4.9 per cent, against economists’ expectations for a decline to 4.8 per cent.
The number of job vacancies fell to 707,000 in the three months to July, down from 711,000 previously. It was the lowest level since the three months to April 2021. Excluding the pandemic period, vacancies are at their lowest since late 2014.
“The labour market picture is little changed overall, with some softening still evident,” ONS Director of Economic Statistics Liz McKeown said.
More from BusinessOverall annual earnings growth, excluding bonuses, stood at 3.5 per cent in the second quarter, slightly above the 3.4 per cent expected by economists polled by Reuters.
Bank of England faces inflation dilemma
The data come as the Bank of England assesses how persistent inflation pressures could prove after an energy price shock linked to the Iran war.
While weaker wage growth and falling vacancies point to a cooling economy, the central bank remains alert to the risk that higher energy prices could feed into broader and more persistent inflation.
Financial markets on Monday were pricing in one 25-basis-point interest rate hike by the end of 2026, highlighting uncertainty over the direction of UK monetary policy.
The latest labour market figures could strengthen the case for caution, but the inflation outlook and the potential pass-through from higher energy costs remain key factors for the Bank of England.
