Slack continued to build in the labour market in September, a closely watched survey suggests, strengthening the case for further interest rate cuts this year.
The latest report on jobs from KPMG and the Recruitment and Employment Confederation (REC) showed a continued slowdown in pay growth last month as more candidates competed for fewer roles.
The survey showed that permanent salary growth eased to its slowest pace since February 2021. Temporary pay rates also eased for the first time in three-and-a-half years, albeit only fractionally.
“A greater number of candidates and reduced demand helped to limit pay growth,” it said.
Source: KPMG and REC
The pool of applicants rose due to both an increase in redundancies and lower demand for workers, with the number of vacancies falling for the eleventh successive month.
Jon Holt, chief executive and senior partner at KPMG UK, said: “The overall pool of available candidates is growing as companies are still faced with tough decisions on their headcount”.
The state of the labour market has been an important concern for policymakers at the Bank of England as they look to reduce interest rates in the months ahead.
Rate-setters have been concerned that a tight labour market could fuel strong wage growth, meaning firms face higher costs.
The latest figures from the Office for National Statistics (ONS) suggest that wage growth has started to ease meaningfully, but there are still big questions about the quality of the data, particularly regarding the unemployment rate.
This means the Bank has had to put more weight on business surveys to form an accurate picture of the labour market.
Holt said rate-setters would “likely be encouraged” by the survey which could “strengthen the case for a further cut in interest rates”.
Neil Carberry, chief executive of the REC, said the slowdown in pay should “add to the willingness of the Bank to become more activist on interest rate cuts,” adding that a faster pace of rate cuts would be “a big boost for business”.
The Bank cut interest rates for the first time since the pandemic in August and markets anticipate at least one more cut this year.