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UK Labour Market In Focus

UK unemployment comes in line with market expectations, slowdown of UK wage growth, and Venezuela and Guyana tensions escalate.

ews headlines continue to be dominated by developments in the Middle East...

UK unemployment remained unmoved at 4.2% in the three months to October, coming in line with market expectations. This came as the number of those out of work increased by 13,000, indicating that the number of unemployed people is at 1.45m. The number of those in work however increased over the period, rising 50,000 to just over 33 million.

Elsewhere, the number of job vacancies eased by 45,000 on the quarter to 949,000, falling for the 17th consecutive period. As the ONS notes, this marks the longest consecutive period of quarterly falls.

Regarding the impact of strikes, the ONS noted that the number of people involved in labour disputes eased to its lowest level since June 2022. Nevertheless, there were still 131,000 lost working days because of industrial action over the month.

Last month, BOE officials suggested that a tight labour market was continuing to feed into inflation with MPC member, Jonathan Haskel, saying that the natural rate of unemployment may have risen to an “upper bound” of 6%. This morning’s data release of course comes ahead of the BoE interest rate decision on Thursday, where markets will be looking to gauge some insight into the central banks future monetary pathway.

UK Wage Growth Eases

This morning, data from the ONS indicated that UK wage growth excluding bonuses increased at 7.3% on an annualised basis in the three months up to October. This was marginally below expectations of 7.4% and a considerable slowdown from last month’s print of 7.8%, when wage growth slipped from July and August’s 7.9% print. The slowdown in wage growth now puts October’s reading at the lowest level since April, though remains historically high. When including bonuses, pay increased at 7.2%, which was much softer than the 7.7% figure forecast and the previous print of 8%.

This means that average weekly earnings were estimated to be £663 for total earnings including bonuses and £620 for regular earnings excluding bonuses.

Despite the softer-than-expected print, given that inflation is coming down, real wages have shown some sign of further increase, again marking a departure from falling real wages seen over much of the last couple of years. As the ONS notes “In real terms (adjusted for inflation using the Consumer Prices Index including owner occupiers’ housing costs (CPIH)), in August to October 2023, total real pay rose by 1.3% on the year, slightly lower than the previous period when it rose by 1.5% on the year.”

When looking at the disparity between private sector and public sector wage growth for total pay, the former was 7.2% while the latter was 7.1%. The ONS further noted in the three months to October, the finance and business services sector witnessed the greatest level of regular pay growth rate at 8.3% on an annualised basis with the manufacturing sector coming in next at 7.4%.

Tensions Rise Between Venezuela and Guyana

Tensions are continuing to escalate between Venezuela and Guyana following President Maduro’s threats to annex two-thirds of neighbouring Guyana. The recent escalation follows the Maduro’s sham referendum which saw over 95% of votes cast by Venezuelans favour annexing the Essequibo region of Guyana. In response, Guyana has put troops on full alert as Brazil have amassed forces on their border with Guyana and Venezuela.

Venezuela have long since laid territorial claims to Essequibo, and the discovery of oil reserves in the region’s waters have exacerbated Caracas’ calls. The dispute is currently with the International Court of Justice, with The Hague reaffirming that Venezuela should not do anything to unsettle the status quo while the hearing continues.