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By: Editorial Team, StoneX Media
UK vacancies have fallen by a further 6,000 to 707,000, the lowest level since 2021, and employers removed another 13,000 workers from company payrolls in July. The Bank of England rate path is caught between that cooling labor market and average earnings still running at 3.5% year on year, which is why policy has not moved decisively in either direction. Unemployment held unchanged at 4.9% in the three months to June, slightly above expectations of 4.8%, so the headline itself gives the central bank little to act on. Beneath it, the hiring picture and the pay picture are telling two different stories at once.
Fiona Cincotta, StoneX Senior Market Analyst, has spent more than 15 years trading and analyzing UK, European and U.S. markets, working across foreign exchange, equities and commodities with a particular focus on UK and European themes. That coverage runs directly through the data the Bank of England is weighing, from labor market releases and wage settlements to the consumer price index prints that shape rate expectations.
UK vacancies fell by 6,000 to 707,000, the lowest level since 2021, and that decline sits alongside 13,000 workers removed from company payrolls in July. The pullback is not spread evenly, and the cost side is doing most of the work, with Cincotta noting that "businesses, particularly smaller companies, are increasingly holding back from hiring because of those higher labor and operating costs that they're experiencing". Consequently, the weakness shows up in hiring intentions well before it shows up in the unemployment rate, which held unchanged at 4.9% in the three months to June. For traders watching the UK labor market, vacancies and payroll counts are the faster read, and both are pointing the same way. As Cincotta puts it, "the message from the labor market is pretty clear, conditions are continuing to weaken".
"The jobs market isn't generating the kind of wage pressure that would force the Bank of England to hike rates", Cincotta says, and that is only half of the problem facing the central bank. Average earnings came in slightly stronger than expected at 3.5% year on year against 3.4% previously, yet the composition tells a different story, because private sector wage growth slowed to 2.8%, its lowest level in six years, whereas public sector wage growth remained very strong at 6.1%. In other words, a single headline earnings figure is averaging two economies that are moving in opposite directions, which blunts its value as a policy signal. The result is a Bank of England with no clean case for tightening and no obvious trigger for cutting hard either, since "the economy isn't weakening enough to make any sort of aggressive rate cuts an obvious next step from the central bank". For sterling, that leaves the next consumer price index release carrying more weight than the labor data just delivered.
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--- Written by Frédéric Guétin, StoneX Media Producer
--- Expert: Fiona Cincotta, StoneX Senior Market Analyst
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The Federal Reserve has returned to hiking with unanimous support, and its minutes show a majority backing another move before year-end. Markets now price high odds of a further Federal Reserve rate hike, and that shift is lifting U.S. Treasury yields and the U.S. dollar.
With no Fed forward guidance to lean on, rates markets are building their view of the Federal Reserve one data release at a time. A weak payrolls report and a cooler inflation print show how quickly that approach can move rate hike odds, and how fragile the bond market reaction can be.
The UK labor market is cooling, with vacancies at a five-year low and wage growth slowing, even as headline UK inflation climbs. That split weakens the case for Bank of England tightening and widens the policy gap with a resilient U.S. economy.
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