Volatile UK Labour Market Data Points to Plenty of Slack

The UK labor market is showing signs of cooling with rising unemployment and falling vacancies, although a sharp 100k drop in payrolls is likely exaggerated by measurement issues. MUFG expects the Bank of England to remain patient until July before implementing expected rate hikes.

Key Takeaways

• 1.UK labor market data shows gradual cooling, but volatility in payroll estimates (down 100k in April) likely overstates the immediate weakness due to seasonal measurement issues.
• 2.Unemployment has trended higher to 5.0%, and vacancies have dropped to their lowest level since early 2021, indicating increasing labor market slack.
• 3.The Bank of England is expected to delay immediate rate hikes from June to July, monitoring forward-looking indicators for second-round inflation effects.

Table of Contents

• Volatile UK labour market data continues to point to plenty of slack
• Don't take payrolls at face value – but the cooling labour market trend remains
• Dovish jobs data but focus will remain on inflation risks
• UK payroll employment plunged – but watch for revisions
• Clear labour market slack and cooling pay growth
• Disclaimer