UK Experiences Decrease in Job Vacancies as Wage Growth Slows to 6.5%

Highlights

UK Labor Market Report – January 2023

Analysis of the recent UK labor market report shows a focus on UK average earnings, employment changes, and the unemployment rate. The current softer wage growth and weakening labor market conditions may lead to a reduction in disposable income, potentially impacting consumer spending and demand-driven inflation.

Key Figures

1. In November, average earnings (including bonuses) increased by 6.5% (3-month/year) following a 7.2% rise in October, falling short of economists' forecast of 6.8%.
2. The unemployment rate remained steady at 4.2%, with employment rising by 73,000, surpassing economists' forecast of a 50,000 increase and a 4.2% unemployment rate.
3. Job vacancies decreased by 49,000 in the three months leading up to December, marking a decline for 18 consecutive periods.
4. The number of payrolled employees dropped by 24,000.

Implications for Monetary Policy

The unexpected soft wage growth figures may prompt the Bank of England to consider rate cuts, as wage growth has been a concern. Strong wage growth has fueled consumer spending and demand-driven inflation, necessitating a more hawkish rate path.

GBP/USD Reaction

Before the release of UK employment figures, GBP/USD reached a high of $1.27290 before dropping to a low of $1.26765. Following the data, the currency pair rose to a high of $1.26830 before falling to a low of $1.26597, ultimately closing Tuesday down by 0.46% at $1.26679.

160124 GBPUSD 3 Minute Chart

Upcoming Events

The upcoming focus will be on the NY Empire State Manufacturing Index, where positive manufacturing sector conditions could support expectations of a US soft landing. Additionally, FOMC member Christopher Waller and Bank of England Governor Andrew Bailey are scheduled to speak, with Governor Bailey testifying at the Lords Economic Affairs Committee hearing at 1500 BST.