United Kingdom: Labor market remains robust heading into 2024
According to the statistical office, vacancy numbers declined in the three months to January for the 19th consecutive three-month period. More positively, employment increased by 48,000 month on month in January, the fifth straight month of gains, while the unemployment rate in the three months to December was 3.8%, the lowest in almost a year. In addition, wage growth clocked 5.5% year on year in December, notably above the rate of inflation and thus pointing to improving consumer purchasing power.
Our Consensus is for the unemployment rate to rise slightly in the coming quarters as the effect of past rate hikes is increasingly felt, while sticky wage growth could limit the pace of rate cuts this year.
On the implications for the Bank of England’s monetary stance, Nomura analysts said:
“December wage growth was stronger than expected, with upward revisions to the November print. The unemployment rate declined, compared with forecasts for a rise. We think the Bank of England will likely continue to wait for a bit longer before it begins its cutting cycle, owing to heightened uncertainty and volatility over labour market and inflation data.”