The UK jobs market has shown signs it may be turning a corner as official data said there was an increase in the number of payrolled employees in August.
There were 10,000 more payrolled employees in August, an upward revision from an estimate showing a drop of 8,000, fresh figures suggest.
But an initial estimate by the Office for National Statistics (ONS) suggested some 10,000 jobs were lost in September, suggesting the concerning trend across the jobs market is set to persist.
The unemployment rate held at 4.7 per cent despite the drop in the numbers of people on the payroll while the inactivity rate was 21 per cent, “largely unchanged” on the previous quarter but below levels seen a year ago.
“After a long period of weak hiring activity, there are signs that the falls we have seen in both payroll numbers and vacancies are now levelling off,” said Liz McKeown, director of economic statistics at the ONS.
“We see different patterns across the age ranges with record numbers of over 65s in work, which the increase in unemployment was driven mostly by younger people.”
Overall labour market data will nevertheless add pressure on Chancellor Rachel Reeves ahead of the Budget given the jobs market has suffered from a year of turbulence since last year’s £20bn hike to employers’ national insurance contributions (NICs).
The retail and hospitality sectors have widely blamed the government for adding costs on businesses, with the incoming Employment Rights Bill threatening to have a “chilling” effect on employment in the UK.
The ONS also said on Tuesday wage growth excluding bonuses in the three months to August fell to 4.7 per cent.
Including bonuses, wage growth reached five per cent, which was 0.3 percentage points higher than economists polled by Bloomberg predicted.
Jobs market data to weigh on Bank decision
The figures are likely to leave Bank of England officials on edge given fears that “second round effects”, where high wage growth and inflation levels bump each other up, could make price growth harder to curb.
External member Catherine Mann said last week that the Bank should keep interest rates at a “restrictive” level in order to squeeze out inflation fears among the British public.
The comments suggest Mann is lobbying her colleagues to keep interest rates at four per cent at the November meeting, which remains on a knife-edge.
Economists believe Governor Andrew Bailey will be the deciding vote splitting hawks from doves, with the meeting in August having to go to a second vote after Alan Taylor initially voted for a 50 basis point cut.
Taylor argued that a severe weakening in the jobs market posed a threat to the UK economy and would weigh down on price growth.
Other policymakers have said high wage growth levels looked set to push up on wage growth and inflation expectations, which have remained elevated.
The ONS will publish inflation data for September next week. Forecasters believe price growth will rise by as high as four per cent, double the Bank’s two per cent target.