KPMG UK comments on today’s labour market data

"Today’s data strengthens the Bank of England’s case to resume cutting interest rates next month, as moderating wage pressures and a softening labour market are expected to bring wage growth closer to levels consistent with the inflation target by the end of the year.

“Wage growth slowed to 4.5% in September while headline pay growth has seen upward pressure from higher pay settlements in the public sector feeding through since the start of the year. Public sector pay growth edged up further to 7.6% in September, and remains significantly above private sector pay growth, which fell to 3.8%.

“Public sector pay growth may now be approaching a peak, with last year’s generous settlements not expected to be repeated given the fiscal pressures the Chancellor is facing. Meanwhile private sector pay growth, the Bank’s preferred measure, is also anticipated to fall further with more people in the labour market seeking work, weakening workers’ bargaining power.

“Unemployment increased to 5% in the three months to September. Hiring activity remains weak and survey evidence suggests that additional uncertainty from the Budget is keeping a lid on activity, as employers await the details of any fiscal measures. However, there is scope for a tentative recovery in hiring if businesses manage to avoid another round of employment cost increases.”