By Suban Abdulla and William Schomberg
LONDON, Jan 20 (Reuters) – Britain’s jobs market weakened in the run-up to November’s budget announcement by finance minister Rachel Reeves and wage growth slowed, data showed on Tuesday, potentially easing the Bank of England’s worries about persistent inflation pressures.
Economists saw some signs of stabilisation as job vacancies rose – suggesting some willingness to hire by employers – but the big picture remained one of caution in the jobs market.
“The UK jobs market is in a more problematic phase with spiralling labour costs likely to mean notably higher unemployment,” said Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales.
“Though these discouraging figures will reinforce fears among policymakers over the health of the economy, the speed at which the jobs market is deteriorating is unlikely to be enough to trigger an interest rate cut next month.”
A measure of payrolls data from the tax office showed a drop of 43,000 in December from November, the biggest monthly fall since November 2020 although there have been bigger preliminary estimates of falls in that period which were subsequently revised up, an Office for National Statistics official said.
A fall of 38,000 first reported for November was revised to show a decline of 33,000 people in payrolled employment.
Annual pay growth in the private sector excluding bonuses – which is being closely watched by the Bank of England – slowed to 3.6% in the three months to November, its slowest rise since November 2020, from 3.9% in the three months to October.
Overall core pay growth slowed to 4.5% in the September-to-November period compared with a year earlier, slightly below the 4.6% growth in the three months to October and in line with economists’ expectations in a Reuters poll.
The jobless rate – which is based on a survey that the ONS is in the process of overhauling after responses fell to low levels – held at 5.1%, as expected, and the highest since January 2021.
BOE LIKELY TO HOLD RATES NEXT MONTH
The BoE, which is expected to hold rates at 3.75% in February, is watching pay as a gauge of how long Britain’s still high rate of inflation is likely to last.
The pound weakened against the dollar and the euro after the data was published. Financial markets are pricing in one or two 0.25 percentage-point interest rate cuts by the end of 2026.
Jack Kennedy, senior economist at jobs website Indeed, said a 10,000 rise in vacancies to 734,000 in December represented a bright spot in Tuesday’s data.
“But a clearer improvement in the UK economic outlook is likely needed before hiring activity picks up more meaningfully,” Kennedy said. “Lower interest rates would be the most obvious catalyst, potentially supporting consumer spending.”
British inflation is likely to have edged up to 3.3% in data for December due to be published on Wednesday but BoE Governor Andrew Bailey has said he expects it will sharply fall to around the central bank’s 2% target in April or May.
Figures published last week showed stronger-than-expected growth in the economy during November after months of caution among businesses ahead of finance minister Rachel Reeves’ budget that month.
However, the economy is expected to grow by only 1.3% in 2026, the International Monetary Fund said on Monday, barely half its average pace in the roughly 15 years before the 2007-09 financial crisis.
(Reporting by Suban Abdulla and William Schomberg; Editing by Andrew Cawthorne)
