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(Bloomberg) — The UK labor market continued to cool over the summer as firms braced for more tax increases to hit the economy, official figures show.
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The number of employees on payrolls dropped a further 8,000 in August, the seventh consecutive fall, the Office for National Statistics said on Tuesday. It was only slightly smaller than the 12,000 decline forecast on average by economists surveyed by Bloomberg.
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Wage growth excluding bonuses moderated to 4.8% in the three months through July, the lowest level in three years and down from 5% in the previous period. Private sector wage growth — which is monitored most closely by the Bank of England — slowed to 4.7%. Unemployment held at a four-year high of 4.7%, while vacancies continued to fall.
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The figures are a fresh blow for Chancellor of the Exchequer Rachel Reeves, who is accused by her critics of causing the slowdown with sharp increases to payroll taxes and the minimum wage in April. Companies and consumers are now preparing for another round of tax rises in the Nov. 26 budget to fill a new hole in the public finances.
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At the same time, the figures may do little to ease inflation concerns at the Bank of England. While Governor Andrew Bailey has highlighted the weakness of the labor market, officials are increasingly worried that a recent spike in inflation is leading consumers to expect strong price growth to be sustained.
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Food and energy bills have boosted inflation to the highest level in 18 months and data due tomorrow is expected to show price growth remaining stubbornly elevated at 3.8%, almost double the BOE’s 2% target.
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Traders have pared back bets on BOE rate cuts over the past month and no longer predict any further easing this year. The nine-member Monetary Policy Committee is expected to keep its key rate at 4% on Thursday.
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—With assistance from Joel Rinneby, Mark Evans and Harumi Ichikura.
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