KPMG UK comments on today’s labour market data

“Wage growth continued to ease in April, falling to 5.2%. The 7% increase in the National Living Wage in April was not enough to alter the downward trajectory in pay pressures. Wage growth is set to ease further this year as the labour market faces continued domestic headwinds which will constrain workers’ bargaining power.

"Unemployment increased slightly to 4.6% in the three months to April, up from 4.5%. The impact of the recent rise in employer’s National Insurance Contributions will likely be a long-term headwind for businesses going forward. It is likely that businesses will look to offset some of the rise in employment costs through a combination of reducing headcount and slowing hiring activity. Given this, we expect the unemployment rate to edge higher over the coming year.

“Today’s labour market data provides the Bank of England with tentative evidence that the rise in labour costs is unlikely to lead to a rebound in wage growth. However, the MPC is unlikely to vote for a cut next week, as it will likely require more evidence that wage growth is falling back to levels consistent with the inflation target. We expect the Bank to hold rates steady in its June meeting and resume easing in August.”