The prospect of the Bank of England cutting interest rates further in the near future has been raised after a closely watched report suggested that the UK jobs market is showing signs of cooling.
Researchers found that the pace of salary increases slowed last month, while hiring of temporary and permanent staff continued to decline.
The report, based on a July survey of around 400 recruitment and employment consultancies, said number of vacancies also fell for the ninth month in a row.
The Recruitment and Employment Confederation (REC) and KPMG, which carried out the research, said there was growing optimism among businesses about the outlook for the UK economy.
The findings will be closely monitored by the Bank of England, which cut interest rates for the first time in more than four years earlier this month after inflation fell to its 2% target.
Governor Andrew Bailey had expressed concern last year that the pace of wage increases was helping to fuel inflation, contributing to the Bank’s decision to raise rates in an attempt to lower them again.
Signs that the pace of wage increases is now slowing may influence the Bank’s thinking, although other key data will also have an important impact, including the latest inflation figures which should be published next Wednesday.
However, financial markets have already priced in that there is a 92% probability of a interest rate cut in November, according to stock exchange data Thursday morning after the report was published.
Investors also estimate that there is a 37% chance of a cut in September.
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Mr. Bailey expressed caution about imminent further cuts during an interview with Sky News following the Bank’s decision to reduce rates from 5.25% to 5%.
However, the REC and KPMG report could be influential amid concerns about the accuracy of the Office for National Statistics’ official employment figures, which are based on a survey that suffered from low participation rates since the pandemic.
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Inflation is not mission ‘accomplished’
‘Green shoots’
The REC and KPMG report states: “Despite making fewer appointments in July, companies continued to increase salaries for permanent employees. The inflation rate was again sharp, although somewhat softer than in June and below the average for inquiry…
“Temporary salaries also increased, although the inflation rate was marginal and the weakest in almost three and a half years. The greater availability of temporary staff weighed on salary rates.”
KPMGUK Chief Executive Jon Holt said: “With forecasts of improving economic growth and potential further interest rate cuts in the coming months, there are green signs of economic recovery.
“But it is still early days for this new government and businesses may be cautious about proceeding with their full recruitment and investment strategies until they have heard more from the Chancellor in her Autumn Budget.”
REC Executive Vice President Kate Shoesmith added: “Employers are gradually emerging from the woods, gaining optimism for their businesses and the wider economy…
“The weaker wage and temporary wage growth suggests that employers are keeping wages in line with inflation, as the Bank of England intends, and the interest rate cut is welcome. Employers will need more than even to maintain trust.”
This story originally appeared on News.sky.com read the full story