UK Labor Market: Lower Jobless Rates Misleading, as Wage Pressures hit New Cycle -Low

There are further signs that the labor market is haemorrhaging jobs both clearly and broadly with fresh falls in the more authoritative measure of jobs covering payrolls.  Indeed, private sector payrolls are still falling, down over 0.5 ppt in y/y terms.  Admittedly, headlines may be formed around a surprise fall in the jobless rate to 4.9% but this is in no way any sign of fresh tightening the labor market. Instead, it reflects a rise in in inactivity, possibly reflecting dashed hopes of finding a job.  This is not surprising given the further fall in vacancies.  Indeed, the ratio of vacancies to unemployed – perhaps a better guide of labor market tightness than the jobless rate as it reflects both the supply and demand for labor continues to trend lower (Figure 1).  As a result, it does seem as if this is at least partly behind the further fall in wage pressures.  Indeed, private sector regular earnings are now running at below 3%, the lowest since pandemic related pressures softened them in mid-2020.