The British Pound is largely unmoved against the Euro and US Dollar on Tuesday after UK labour market figures revealed a rise in unemployment and slower wage growth, reinforcing market bets on a Bank of England rate cut later this week.Latest — Exchange Rates:
Pound to Euro (GBP/EUR): 1.13819 (-0.01%)
Pound to Dollar (GBP/USD): 1.33736 (-0.04%)
Euro to Dollar (EUR/USD): 1.17499 (-0.03%)
Britain’s labour market has shown fresh signs of cooling, providing the Bank of England with more room to loosen policy in the near future.Official figures for August to October put the unemployment rate at 5.1 percent, the highest since early 2021.
Image: UK unemployment rate – courtesy of Pantheon Macro
The number of unemployed people rose by 158 000 to 1.83 million, while the employment rate slipped to 74.9 percent.
More timely tax data indicate payrolled employment declined by 38 000 in November, following a 22 000 drop in October, and early estimates suggest 171 000 fewer payrolls than a year earlier.
Earnings growth also continued to ease.
Average weekly wages excluding bonuses rose 4.6 percent in the three months to October, down from 4.7 percent.
Pay in the private sector slowed sharply to 3.9 percent, the weakest pace since 2020, while public‑sector earnings accelerated to 7.6 percent.
Total pay growth, which includes bonuses, also slipped to 4.7 percent.
Image: UK data releases on 16th December
Analysts noted that wage growth remains above the Bank’s 2 percent inflation target but is heading in a more encouraging direction.
This cooling backdrop has increased expectations of an interest rate cut, with traders now almost fully pricing a quarter‑point reduction on Thursday.
Pantheon Macroeconomics says the latest labour-market data underline a jobs slowdown driven by Budget uncertainty, but warns that pay growth remains too strong for the Bank of England to sound relaxed about further easing.
The consultancy notes that hiring decisions have been delayed in recent months as firms waited for clarity on fiscal policy, weighing on payrolls and pushing unemployment higher.
However, it argues the November drop in payroll employment is likely to be revised higher and that the reliability of the data remains questionable given the scale and consistency of recent upward revisions.
More importantly for policymakers, Pantheon highlights that underlying wage growth has stabilised at a rate still inconsistent with the inflation target, suggesting the weakness in employment is not translating into rapid pay disinflation.
As a result, Pantheon expects the MPC to cut rates this week in response to broader downside risks to growth and inflation, but to strike a cautious tone on future moves, potentially stepping back from guidance that points to a steady sequence of further cuts.
Officials said the figures confirm that hiring momentum has weakened.
Image: UK payrolls – courtesy of Pantheon Macro
The number of employees on payroll continued to fall because hiring has slowed, and businesses reported fewer jobs available.
Vacancies were broadly flat during the latest period, pointing to stagnating demand for workers.
The rise in unemployment was particularly evident among younger age groups.
Businesses are feeling the strain from higher employment costs and new legislation, limiting their appetite to hire and invest.
Some trade groups have described the latest data as “gloomy,” pointing to slowing wage growth and higher joblessness as clear signs of a sluggish economy.
Economists argue that the easing labour pressures remove one obstacle to cutting interest rates, but caution that the strong increase in public‑sector pay and still‑elevated inflation could complicate the policy outlook.