UK pay growth accelerates, but vacancies fall again – business live

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Liz Kendall: we need to get Britain working again

On today’s labour force statistics, Work and Pensions Secretary, Liz Kendall MP says:

“Today’s figures are a stark reminder of the work that needs to be done.

To get Britain growing again, we need to get Britain working again – so people have good jobs which pay decent wages and offer the chance to progress.

Through our Get Britain Working Plan we will do just that – transforming Jobcentres, making sure every young person is earning or learning and properly joining up work, health and skills support to drive up employment and drive down poverty in every corner of our country.

And from April, someone working full time on the minimum wage will be £1,400 better off, meaning more money in people’s pockets, delivering on the plan for change to improve living standards and make people better off.”

The pound has nudged up to $1.27 against the US dollar, up 0.15%, to its highest since last Friday, after this morning’s UK jobs report.

Another sign that interest rates cuts are seen as less likely….

Today’s pay growth figures will make the Bank of England’s monetary policy committee “nervous”, says Thomas Pugh, economist at audit, tax and consulting firm RSM UK.

Pugh explains:

“The jump in wage growth excluding bonuses to 5.2% puts another nail in the coffin of an interest rate cut on Thursday. What’s more, there was little sign that firms have reduced hiring ahead of the budget. Our base case is that the MPC will cut rates once a quarter next year, but strong wage growth and a second Trump presidency increases the risk of fewer rate cuts.

Pugh adds there is little evidence that pre-budget worries caused firms to radically alter their employment plans.

Employment rose by 173,000 in the three months to October and the unemployment rate remained at 4.3%. Admittedly, the employment statistics are unreliable at the minute so the jump may have been driven by revisions to the data rather than a genuine increase. It may also be that most of the impact on the labour market will come after the budget.

Indeed, the number of employees on payrolls dropped by 35,000 in November, but this metric is extremely volatile, and we don’t put much faith in one month’s numbers so this is one to watch.

Bank of England interest rate cuts now less likely

City traders are scrambling to readjust their expectations for UK interest rate cuts, following this morning’s acceleration in UK wage growth.

The money markets now indicate there’s just a 7% chance that the Bank of England cuts interest rates on Thursday, down from around 15% yesterday.

The markets no longer expect three cuts next year either. Bank rate, which is currently 4.75%, is now seen falling to around 4.1% in December 2025, meaning only two quarter-point rate cuts are fully priced in.

Yesterday it was expected to fall nearer to 4%, which had implied three quarter-point rate cuts next year.

Ashley Webb, UK economist at Capital Economics, says today’s wage data will do little to shift the Bank’s focus away from worrying about high inflation, explaining:

The increase in regular private sector pay growth in October will increase the Bank of England’s concerns about a resurgence in inflation despite the weak news on activity.

Real earnings accelerate too

UK pay growth has also jumped once you adjust for inflation.

Using CPI real earnings, real regular and total pay rose by 3.0% on the year in August to October, the Office for National Statistics reports.

That’s the fastest growth in real pay since this spring, the ONS explains:

Regular real annual growth was last higher than 3.0% in April to June 2024 (3.2%) and for total real pay was equal to 3.0% in March to May 2024. Total annual growth is no longer affected by the civil service one-off payments made last year.

Introduction: UK pay growth picks up

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Pay growth across the UK has picked up, ending the recent slowdown in earnings, even though fewer vacancies are available for workers across the economy.

New data from the Office for National Statistics this morning show that average pay, both including and excluding bonuses, rose by 5.2% per year in the three months to October.

That’s up from 4.9% for regular earnings in July-September, and 4.4% for total earnings [updated], suggesting an acceleration in pay growth this autumn.

Manufacturing workers saw the largest pay rises, again, with average pay up by 6.0%.

Regular earnings (ex-bonuses) swelled by 5.4% in the private sector, and by 4.3% in the public sector, the ONS reports.

While rising pay will cheer workers, especially as Christmas bills pile up, it will cause some jitters at the Bank of England – where policymakers fret about inflationary pressures building.

ONS director of economic statistics Liz McKeown said:

“After slowing steadily for over a year, growth in pay excluding bonuses increased slightly in the latest period, driven by stronger growth in private sector pay. Pay growth including bonuses increased by more, but this reflects previous figures being affected by the one-off payments made to some public sector employees in 2023.

“The number of people on payrolls grew slightly in October, but we have seen annual growth rates continue to slow, showing a consistent trend with our latest jobs data from employers. The number of job vacancies has also fallen again, though the total remains a little above where it was before the pandemic.

More broadly, the latest labour force statistics also show another decrease in vacancies; they fell by 31,000 in the September-November quarter to 818,000 – still above their levels before the Covid-19 pandemic.

The ONS has reweighted the Labour Force Survey with updated population data, in an attempt to make its statistics more reliable.

Today’s report shows that the unemployment rates was 4.3% in the three months to October, the same as a month ago.

Joe Nellis, economic adviser to accountancy and advisory firm MHA, says:

The unemployment rate holding steady at a relatively low 4.3% is not a significant cause for celebration, as the long-standing problems in the UK’s labour market continue to undermine attempts to reignite a flatlining and underperforming economy.

The economic inactivtiy rate, which measures how many people are neither in work nor looking for a job, was estimated at 21.7% in August to October 2024, slightly lower than the 21.8% in July-September.

The agenda

• 9am GMT: IFO survey of German investor confidence

• 10am GMT: EU trade balance for October

• 1.30pm GMT: US retail sales report for November