The pace of wage growth in the United Kingdom has noticeably slowed, according to the latest official figures, providing the Bank of England with significant evidence that the hot labour market is finally cooling off.
Data from the Office for National Statistics (ONS) shows that regular pay, which excludes bonuses, grew by 5.7% in the three months to August compared with the same period a year earlier. This marks a slowdown from the 5.9% recorded in the three months to July.
Steady Unemployment Amidst Economic Shifts
Despite the cooling in pay growth, the unemployment rate held firm at 4.3%, unchanged from the previous month's reading. However, a more telling sign of the shifting economic landscape is the continued decline in job vacancies.
The number of open positions fell for the sixteenth consecutive period, dropping by 29,000 between June and August to settle at 812,000. This sustained downward trend strongly indicates that employer demand for new staff is waning.
Implications for Bank of England Policy
This cooling in the jobs market will be closely scrutinised by the Bank of England's Monetary Policy Committee (MPC). The slowdown in wage growth is a key metric the Bank monitors in its ongoing battle against persistent inflation.
While pay growth remains elevated above levels considered consistent with the Bank's 2% inflation target, its clear downward trajectory will likely be seen as a positive development. It suggests that previous interest rate hikes are effectively tempering the economy and dampening inflationary pressures.
Economists and policymakers will be watching closely to see if this trend continues, as it could influence the timing and pace of any future cuts to interest rates, which currently stand at a 16-year high.
