KPMG UK comments on today’s labour market data

"Slowing activity in the labour market, coupled with pay pressures easing, will likely prompt the Bank of England to lower interest rates next month. The impact of April’s tax and administrative changes has led to a marked slowdown in hiring activity among firms. With domestic activity remaining sluggish, the MPC will likely want to provide support via looser policy to prevent a more significant deterioration in the labour market.

"Wage growth continued to ease in May, falling to 5%, its lowest level in nearly three years. Evidence so far suggests firms have adjusted to April’s increase in payroll costs through a combination of reduced hiring and offering lower pay settlements. This is consistent with our view that pay growth will moderate further and fall to around 3.5% by the end of this year.

"Unemployment edged up to 4.7%, with payroll data also pointing to a sustained loosening in the labour market. The number of payrolled workers fell by 41,000 in June. Although these are provisional estimates, this suggests that demand for workers has weakened significantly since the increase in employer NICs and the hike in the National Living Wage came into effect. We expect unemployment to edge up over the coming year, increasing to 4.9% by the end of 2026."