UK labour market loses momentum in Q2

In the second quarter, Britain's labour market experienced a decline in momentum, as highlighted by official data released on Tuesday. The private sector saw a deceleration in earnings growth, with regular earnings in the private sector rising by just 2.8 percent annually over the three months to June, marking the weakest growth since October 2020.

This figure aligns with the Bank of England's own forecast made last month, leading to a slight dip in sterling's value. The unemployment rate remained steady at 4.9 percent, slightly higher than economists' expectations of a 4.8 percent drop. The data suggests that the labour market is easing slowly, but not rapidly enough to cause significant concern for the Bank of England.

Rob Wood, chief UK economist at Pantheon Macroeconomics, noted that the weaker-than-expected jobs picture indicates a gradual easing of the labour market. The number of job vacancies fell to 707,000 in the three months to July, the lowest since April 2021, excluding the pandemic. This trend is concerning as it suggests the lowest number of vacancies since late 2014.

While the earnings and unemployment data were collected before Prime Minister Andy Burnham's rise to power last month, economists believe these figures signal a labour market that is losing momentum and poses a downside risk to employment. Andrew Hunter, senior economist at Moody's Analytics, added that ongoing uncertainties surrounding the US-Iran conflict and potential tax hikes in the upcoming October budget could further dampen employment prospects.

Employment grew by a modest 83,000 in the second quarter, far below the forecasted 129,000 and the weakest growth in five months. Additionally, separate tax office data revealed a decrease of 12,850 payroll employees in July, marking the sixth consecutive month of decline. Even when overall earnings growth, excluding bonuses, was recorded at 3.5 percent in the second quarter, it still appeared somewhat anomalous.