UK unemployment falls to 4.7 per cent in August; markets still price a November rise

Employment rose by 102,000 in the month, far above the 5,000 expected, while wage growth slowed to 3.7 per cent. As of 13 October, traders priced an 88 per cent chance of a rise in November.

Britain's unemployment rate fell to 4.7 per cent in August, official figures showed, against expectations of 4.9 per cent. The rate was also 4.9 per cent the month before.

Employment rose by 102,000 in the same report, far above the 5,000 forecast. In the three months before that, employment had risen by 66,000. Average weekly earnings grew 3.7 per cent year over year, below the 3.8 per cent expected and slower than the prior reading.

The slower wage growth eases some of the pressure on the Bank of England. Officials such as Andrew Bailey and Dave Ramsden had spent recent weeks flagging persistent energy costs and wage growth as reasons the no-hike stance was getting harder to hold, according to remarks on 8 October.

Markets still leaned toward a rise. As of 13 October, traders put an 88 per cent chance on a quarter-point increase in November and 12 per cent on a hold, according to Mortgage One. Mortgage One's forecast showed traders had also priced the Bank Rate reaching about 4.5 per cent by April 2027 and 4.9 per cent by October 2027.

The Bank of England held its Bank Rate at 3.75 per cent on 17 September. Policymakers voted six to three against raising it to 4 per cent. Its next decision is due on 5 November. Inflation stands at 3.1 per cent, above the Bank's 2 per cent target.

The stronger labor market reading cuts against the case made by Bank of England policymaker Swati Dhingra. On 24 September she argued, citing signs of easing price pressures and weakness in the UK labor market, that financial conditions had already done much of the tightening needed, according to FXStreet, citing Reuters.

For US-focused readers, the data is background on UK policy rather than a direct driver of American equities, since it says nothing about Federal Reserve policy or domestic earnings.