Deutsche Bank’s Chief UK Economist Sanjay Raja notes that recent UK labour market data show a mix of stronger employment indicators and softer pay dynamics, suggesting the jobs market is not yet fully recovered. He expects the labour market to stay sluggish in coming months and argues this mixed backdrop allows the MPC to delay rate hikes while monitoring economic and geopolitical developments.

Mixed jobs data delays rate action

"Today’s labour market data was a mixed bag. The unemployment rate surprisingly slipped lower to 4.9%. Tax data showed a surprise rise in payrolled employees (+2k) after a mammoth upward revision to April’s data (from -100k to -53k)."

"We expect the labour market to remain a bit sluggish through the coming months. But there is some light at the end of the long enduring US/Iran conflict. Should the MoU hold, we would expect employment trends to pick back up on the margins."

"For now, today’s mixed data buys the MPC more time to wait and see how the economy evolves and how geopolitics play out. We see little rush for the MPC to push for rate hikes just yet. Instead, the Bank can let the dust settle on the energy conflict before recalibrating policy again."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)