Steady UK jobs data all but clinch BoE interest rate hold this week

(Alliance News) - The Bank of England has little cause for concern from the latest UK unemployment data, making the expected hold on interest rates this week a near certainty, according to analysts on Tuesday.

The BoE's Monetary Policy Committee releases its latest interest rate decision on Thursday.

UK unemployment was steady in the three months to October, figures from the Office for National Statistics showed on Tuesday.

The unemployment rate for the period from August to October was 4.2%, unchanged from the July to September period. The unemployment rate came in line with FXStreet-cited market consensus.

In the three months to September, annual growth in average total pay, excluding bonuses, was 7.3%. This was slightly lower than market consensus of 7.4%. Growth in the previous three-month period was 7.8%.

Including bonuses, average pay growth was 7.2%, much lower than market expectations of 7.7%. It was 8.0% in the three months to September.

"The big question was whether there'd be anything in this latest set of jobs figures to trouble Bank of England rate setters when they meet later this week. The answer is a resounding no and taking a look at market expectation another no-change decision looks almost nailed on. As the economy has cooled so has that record pace of wage growth which had so troubled MPC members," said AJ Bell analyst Danni Hewson.

"Whilst the labour market is still showing remarkable resilience, pressure on employers to keep relaxing those purse strings has eased. Pay increases are finally being felt and whilst prices remain high people have adapted and are hyper aware of where they spend every penny and how far those pennies are stretching. People are being cautious and they're not blowing the bank on Christmas 2023. They've had a hard education on the power inflation wields and the bitter taste of the medicine required to counteract it."

Last month, the Bank of England maintained interest rates at a 15-year high of 5.25%, a second-consecutive hold following one in September and ending a streak of 14 successive hikes since December 2021. The BoE has rapidly raised the bank rate from a Covid-19-induced low of 0.10%.

Lloyds Bank agreed MPC members are likely to be happy with the latest unemployment data.

"UK labour market data showed further evidence of a turnover in employment conditions and a larger than forecast fall in wage growth," Lloyds commented.

"Heading into Thursday's Bank of England update, policymakers will probably be pleased with signs that labour market pressures are easing and that wage growth is slowing but will be aware that wage gains remain too high to be consistent with meeting the inflation target on a sustainable basis."

The ONS began to use 'experimental' unemployment data in October, owing to a low response rate for its survey.

By Greg Rosenvinge, Alliance News senior reporter

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