Unemployment fell to 4.2% from 4.4% with wage growth slowing to two-year low of 5.4% – 2.4% when adjusted for inflation. The data also shows vacancy numbers continuing to decline from post-pandemic highs, down to 884,000.
Danni Hewson, AJ Bell head of financial analysis, comments: “The headline unemployment rate might have come in significantly below expectations but there are still important indicators that the UK labour market is cooling.
“Vacancies have been falling steadily for 25 months, backing off from 2021 post-pandemic highs as all those shuttered businesses tried to reopen their doors. But it’s wage growth that’s the eye-catching number this time out, rising at its weakest rate in almost two years.
“Bank of England rate setters will be watching today’s numbers with particular interest and there has been a slight uptick in market expectation that just maybe those MPC members might be persuaded to deliver another cut to the base rate in September. But the smart money is still on those late autumn months for the next decrease, allowing a pause to consider whether increases in natural gas prices filter through to consumers and whether the recent uptick in grocery prices can be offset by falls elsewhere.
“We have to wait until tomorrow for the official inflation number, but expectation has already been managed. There were always going to be bumps along the road but with real wages now 3.2% higher than a year ago the impact of a slight uptick on households should be minor.
“Consumer confidence is crucial, especially following the recent riots which impacted footfall in our towns and cities. And then there’s the data itself; the ONS has admitted their numbers are based on a limited number of respondents.
“Looking at updates from London listed recruiters, businesses are still cautious and the jobs is market subdued. Even if unemployment is down, the employment rate is lower than it was a year ago and there’s still the thorny issue of economic inactivity which has remained stubbornly stuck at 22.2%.
“The new government has been clear that it has plans in place to get people back to work, but it’s not likely to be a quick fix.”
