"UK job market significantly 'loosens': Unemployment rate unexpectedly rises, wage growth hits near four-year low"

The latest data released on Tuesday showed that the UK unemployment rate unexpectedly rose, while the pace of wage growth slowed more than expected, prompting traders to increase their bets on further interest rate cuts by the Bank of England. The UK Office for National Statistics stated that the unemployment rate rose to 4.8%, the highest level since May 2021, while economists had expected it to remain unchanged. In the three months to August, wage growth in the UK private sector slowed to 4.4%, lower than market expectations and the lowest level since the end of 2021. However, this figure is still significantly higher than the around 3% level that the Bank of England considers to be in line with its 2% inflation target. The above data indicates that the UK labor market is continuing to loosen, providing a basis for the more dovish members of the Monetary Policy Committee who hope to maintain expectations for interest rate cuts. As a result, the pound fell, and traders increased their bets on the possibility of rate cuts next year. However, another piece of data showed that the number of job losses in the UK over the past year was much lower than feared, as employers seem to have weathered the most difficult period caused by the 26 billion (approximately $34.7 billion) payroll tax hike in April. The UK Office for National Statistics pointed out that the number of employees in September decreased by 10,000, while the revised number of employees in August increased by 10,000. This decline is in line with economists' forecasts and is lower than the levels of job cuts during the summer. Since the introduction of the first budget by UK Chancellor of the Exchequer Rishi Sunak in October last year, cumulative job losses in the UK have only amounted to 127,000, less than previously estimated. In the three months to September, the number of job vacancies decreased by only 9,000. Currently, the UK inflation rate is close to twice the 2% target, and the debate within the Bank of England about whether "high inflation will lead to further price increases through increasing wage demands and triggering a feedback loop" may intensify further due to the above data. Megan Greene, a policy maker at the Bank of England, emphasized the risks of second-round effects of inflation in a speech on Monday, while the market has almost ruled out the possibility of further rate cuts this year. However, some believe that the current process of inflation easing is ongoing, which may lead the key swing vote in the Monetary Policy Committee to fall on Governor Andrew Bailey. Bailey has maintained a cautiously balanced stance in recent public statements, and he is scheduled to speak in Washington later on Tuesday. This week, several Bank of England policy makers will also make public appearances. It is worth noting that in recent months, the wave of job cuts triggered by the April payroll tax hike and the increase in minimum wage standards has slowed down, with the scale of redundancies smaller than initially estimated. This is consistent with a key survey released by the UK Recruitment and Employment Confederation and KPMG, which found that multiple indicators in the UK labor market showed signs of stabilization in September. Previously, the response rate in the UK Office for National Statistics labor survey had significantly decreased, raising questions about the reliability of official data. In this context, economists and government officials are now paying more attention to private sector survey data and in-employment data based on tax records.