Add thelocalreport.in As A Trusted Source
Britain’s unemployment rate rose to its highest level outside the pandemic era in almost a decade as experts said evidence of a weak labor market increased the likelihood of an interest rate cut at the end of the year.
Official data showed the unemployment rate rose to 5% in the three months to September, from 4.8% in the three months to August.
National Statistical Office This was the highest seen since August 2016, the ONS said, after the odd levels seen during the Covid-19 years were removed.
The ONS said average regular pay growth also declined again to 4.6% in the three months to September, down from 4.7% in the previous three months.
experts The weaker than expected data has strengthened the case for the Bank of England to cut interest rates next month.
Martin Beck, chief economist at WPI Strategy, said: “With a further slowdown in wages growth, the data strengthens the case for the Bank of England cutting interest rates next month.”
He warned that “the possibility of new taxes is increasing in the near future.” Budget creates even further risks to employment, especially if chancellor Is considering raising taxes on businesses again”.
Mr Beck said: “But this time, Rachel Reeves is more likely to target breadwinners rather than employers.”
The pound slipped back, falling 0.4% to 1.313 US dollars and falling 0.4% to 1.135 euros, as financial markets increasingly bet on a rate cut later in the year.
The ONS said earnings still exceeded inflation, although by a small margin, with real wages after taking into account consumer price index (CPI) inflation 0.8% higher, down from 0.9% in the previous three months.
In further evidence of the tight jobs market, the ONS estimated that the number of workers on UK payrolls fell by 32,000 to 30.3 million during October, revised down after a decline of more than 32,000 the previous month, although the number is subject to further revision.
Economists said it was the biggest two-month decline since the end of 2020.
Liz McCann, ONS director of economic statistics, said: “Taken together these figures point to a weak labor market.
“The number of people on payroll is falling, with revised tax data now showing declines for most of the last 12 months.”
There was one silver lining in the data, with vacancies rising for the first time in more than three years – forecast to rise by 2,000 or 0.2% to 723,000 in the three months to October.
Mr Beck said the sharp decline in payroll data points to caution among businesses ahead of the November 26 budget.
“Signs of renewed weakness in the UK labor market suggest that the real economy is beginning to feel the budget tax uncertainty,” he said.
Investec Economics said softening jobs data and wage growth – both of which are being carefully monitored by the Bank of England – raised the possibility of a rate cut to 3.75% from 4% in December.
“What will be important for the December debate, and the path for rates going forward, are the two CPI reports and of course the budget details that we will receive ahead of the December 18 rate announcement,” said Investec economist Ellie Henderson.
James White at the EY Item Club said the figures, and a 4.2% decline in private sector wage growth in the three months to September, remove “a potential obstacle to a rate cut before Christmas”, and also raise the prospect of “further rate cuts in 2026”.