Headline unemployment rose for the third straight month in October, hitting 5.1%, the highest level since January 2021, and just 0.2pp below the peak unemployment rate seen during the pandemic.
Meanwhile, pay pressures continued to moderate, albeit to a lesser extent than market participants had expected. Overall earnings rose 4.7% YoY in the three months to October, the slowest pace since June, with base effects somewhat skewing the metric, while regular earnings rose 4.6% YoY, as near as makes no difference unchanged from the prior month. Importantly, despite moderating, such rates remain incompatible with a sustainable return to the BoE's 2% inflation goal over the medium term, though public sector earnings growth continuing to outpace that of the private sector supports the idea that significant labour market slack is emerging.
Turning to the more timely PAYE payrolls metric, data pointed to payrolls falling by a huge 38k in November, not only the biggest monthly decline since the tail end of 2020, but also the 12th month in the last 13 in which payrolled employment has declined.
On the whole, the message from today's data is a very familiar one, with the labour market continuing to lose momentum, and with risks to the outlook continuing to tilt firmly to the downside, not only given relatively weak recent survey data, but also considering that November's Budget contained precisely zero measures aimed at boosting economic output.
For the Bank of England, the figures will do nothing to deter the Monetary Policy Committee from delivering another 25bp cut at this Thursday's meeting, likely via a 6-3 vote. Policymakers, incidentally, will have had advance sight of the data during their pre-decision deliberations. Looking ahead, a further significant weakening in labour market conditions could prompt the 'Old Lady' to consider another such cut at the next meeting in February, though such a reduction would hinge on the economy having continued to make further disinflationary progress over the winter months.
