“Low unemployment masks fragilities under the surface” says Yael Selfin, Chief Economist at KPMG UK.
“The labour market’s display of resilience continues despite a more challenging economic backdrop, with the unemployment rate close to its record low at 3.9% and pay growth remaining elevated at 6.1%.
“The recent months saw a noticeable decoupling between the revised ONS data and more timely survey indicators, which paint a looser picture of the labour market. The latest KPMG/REC jobs survey pointed to a more sustained weakening in activity, with demand for staff falling in addition to an improvement in worker availability. This is more consistent with our view of a relatively swifter spillover of economic headwinds into the labour market.
“Nonetheless, the labour market could prove tighter in the medium-term. Non-economic migrants have recently accounted for a larger share of overall migration and total net migration is projected to fall.
“Today’s data are unlikely to warrant a major policy shift from the Bank of England, particularly with pay growth still robust and continued worries it could lead to a persistence in price pressures. However, we expect the labour market to weaken in the coming months, which should reduce momentum in wage growth and raise the prospect of interest rate cuts from the summer onwards.”
