UK unemployment remained 4.7% in the summer, up from 4.4% at the start of the year, but there were "silver linings" in the UK jobs market data today that should give some comfort to the Bank of England, said Deutsche Bank’s chief UK economist Sanjay Raja.
Pay growth, excluding bonuses, cooled to 4.8% from 5.0%, which Raja said was "good news" for the BoE's monetary policy committee, who want to see levels nearer 3% to cut interest rates further.
However, there are reasons for continued wariness, with the coming months expected to see caution continue from many employers ahead of the Autumn Budget.
Raja said the data from the Office for National Statistics "will assuage fears of a further ratcheting up in the unemployment rate and should confirm that the worst is likely behind us".
Redundancies remained elevated at 100k for a ninth consecutive month, but employment rose 29K in the three months to July and more people joined the labour force (+30k).
There was several signs of continued slack in the labour market, the economist said, ranging from a rise in the claimant account, a slight increase in the level of unemployment, an increase in marginal workers looking for work an increase in redundancies, as well as an 8K fall in payrolls.
Survey data from outside the ONS also "paint a gloomier picture", Raja said, with hiring intentions subdued due to higher labour costs and likely to remain so with additional budget uncertainty ahead of the Chancellor's big speech in late November.
Furthermore, the transition to higher automation and digitalisation by firms is expected to further dampen jobs demand in industries such as manufacturing, retail and hospitality, to name a few.
The silver lining is that the "pace of slack is slowing," said Raja, with more signs of stabilisation in the "harder" ONS data as opposed to the "soft" survey reports such as PMIs, KPMG/REC, etc.
"The big unwind of jobs hoarding in the labour market is likely complete. Equally, with recruitment difficulties remaining tepid, pay settlements will likely continue edging lower over the course of the year," he said.
"This should give some comfort that the path ahead may be less bumpy than perhaps some of the survey data suggests."
That puts a lot of faith in the 'hard data' from the ONS, which has freely admitted that its labour market data has been plagued by quality issues for some time now.