Proactive Investors - Today’s figures on the jobs market and average earnings suggest the Bank of England’s rate rising spree is beginning to take effect raising hopes that a peak in borrowing costs may be close.
James Smith at ING “Momentum in UK wage growth appears to have eased since 2022, and together with signs that the heat is coming out of the jobs market, there's nothing in the latest report that screams a need to keep hiking rates.”
Figures from the Office for National Statistics showed a fall of 55,000 in the number of vacancies in the three months to April and a 156,000 drop in the number of inactive workers alongside a slight increase in the unemployment rate in the quarter to March.
The ONS figures also showed a 136,000 fall in payrolled employees between March and April – the first reduction since February 2021.
There were also signs that growth in pay was softening with total pay rising 5.8% year-on-year in the first quarter, down from 6% in the fourth quarter.
Samuel Tombs at Pantheon Macroeconomics thinks “wage growth is slowing rapidly enough for the MPC to keep Bank Rate at 4.50% at its next meeting on June 22.”
He pointed out year-over-year growth in private sector average weekly earnings excluding bonuses dropped to 7.0% in the first quarter - in line with the Committee’s forecast in last week’s Monetary Policy Report - from 7.3% in the fourth quarter.
Martin Beck, chief economic advisor to the EY ITEM Club, said: "“On balance, the latest developments in labour market quantities and prices don’t offer any obvious support to another rate rise when the MPC meets next in June.”
“The focus now switches to the next set of inflation data, due on 24 May, to see if that shows the evidence of inflation persistence required to make the MPC increase rates again.”
Smith agreed. “Our base case is a pause next month, though by its own admission, the Bank of England is data-dependent now, and there’s still another jobs report and two CPI releases before next month’s meeting.”
Last week the Bank of England increased interest rates to 4.5%, the highest level in 15 years.