The UK labour market continued to cool over the summer, with wage growth easing further and vacancies trending down. There’s little in the latest data from the Office for National Statistics (ONS) that is likely to derail the steady pace of interest rate cuts anticipated from the Bank of England over the coming months.
Though the headline national unemployment rate dipped by 0.4 percentage points to 4.0% in the three months to August, underlying data quality issues suggest that figure should continue to be taken with a pinch of salt. The broad challenges facing the UK labour market haven’t gone away, including a persistent inactivity gap, worker shortages in some sectors (despite the overall cooling) and an employment rate that still hasn’t returned to pre-pandemic levels.
Inactivity fell in the three months to August, but remains well above its pre-pandemic level and continues to contribute to an incomplete employment recovery. This stubbornly high inactivity underlines why the Labour government is prioritising employment support and tackling long-term sickness to try and get more workers back from the sidelines.
