That disconnect is clearly visible in wage growth. Pay is rising by 6.1% across government, compared to just 2.8% in the private sector. Admittedly, that latter figure is being slightly depressed by “compositional” effects, something the BoE is keen to point out. This is a slightly weird quirk that’s emerged in the survey underpinning those wage figures, which show a rise in low-paid employment relative to higher-paid jobs (the opposite of what the more reliable payroll data described above), and which is skewing the average level of pay growth lower. Strip that out, and private-sector pay would be 0.4ppt higher.
Still, the basic story here is that the jobs market is cool. We can see that in the vacancy numbers, which are still gradually falling and are well down on pre-Covid levels. We can see that in the unemployment rate, notwithstanding the latest reliability issues. And crucially for the Bank of England, there is little sign that wage growth is about to turn higher.
Barring a severe and persistent spike in energy prices, we think the Bank will keep rates on hold until next spring, before cutting rates at least twice in 2027.