“Labour market is yet to feel the full pressure from ailing economy” says Yael Selfin, Chief Economist at KPMG UK.
“The labour market continues to slow down as weaker economic conditions gradually make their impact. While latest data show unemployment remains relatively low at 4.2%, hiring activity is set to decelerate on the back of weaker demand and greater uncertainty among employers, with the latest KPMG/REC jobs survey pointing towards a continued fall in vacancies.
“Weaker momentum was consistent with pay growth easing to 7.3% in October, continuing in the downward trend since the summer. However, with price pressure also expected to moderate in the coming months, pay growth is set to outstrip inflation throughout next year, providing a welcome boost to household real incomes.
“While momentum has weakened, the labour market is still tight. The Bank of England will remain alert as continued tightness could cause a setback in its battle against inflation, particularly if strong wage growth contributes to persistence in domestic inflation. We currently expect unemployment to average 4.7% next year as labour demand weakens further, and for wage growth to fall back towards its long-term average. This could be consistent with the MPC 2% target and so further monetary tightening may not be required at this cycle.”
