The number of payrolled employees in the UK rose by 15,000 between December 2023 and January 2024, labour market data from the Office for National Statistics (ONS) has revealed.
This morning’s data also showed annual growth in regular pay, excluding bonuses, slowed to 6.1% in the three months to January.
The rate of unemployment was 3.9% in the three months to January, up from from 3.8% in the previous three months.
Newspage asked experts when the Bank of England should cut the base rate — and if a cut may now come sooner.
Reaction:
Darryl Dhoffer, adviser at The Mortgage Expert:
“Annual pay growth is slowing down and UK unemployment is rising.
“I can’t say these figures are surprising, and can see them worsening as 2024 unfolds.
“Our economy needs a shot in the arm and Threadneedle Street can deliver it by cutting rates.
“But the worry, as ever, is that they will be behind the curve again.”
Matthew Jackson, director at Mint FS:
“Rising unemployment and falling wages signal big problems for the wider economy.
“This layering effect points to a recession becoming baked in unless positive action is taken to fuel growth.
“Surely the Monetary Policy Committee cannot sit on their hands any longer?
“There needs to be a base rate cut before the economy slides into the abyss.”
Craig Fish, director at Lodestone Mortgages & Protection:
“It’s very possible that this bad news could be a blessing in disguise and signal that the first base rate cut from the Monetary Policy Committee is now on the horizon.
“Wages dropping signals that there will be continued hardship on people’s pockets and unemployment rising signals problems for UK employers.
“I doubt we’ll see a cut in March, but it’s now possible in May.”
Andrew Montlake, managing director at Coreco:
“It does seem like we are starting to see some recessionary impact with wage growth weakening, albeit slightly, and a rise in unemployment.
“Whilst there is some good news in the bad for the mortgage market, as this could help to further dampen inflation and reduce interest rate expectations, economists will be concerned to see if this becomes a snowball running downhill.
“The Bank of England should be focused on getting ahead of the curve rather than once again breathlessly trying to catch up.
“An earlier rate cut than expected would help rather than hinder economic progress, the mortgage and property markets, and the public as a whole.”
Hannah Bashford, director at Model Financial Solutions:
“This data could be a good thing for mortgage borrowers and will hopefully give the Bank of England some pause for thought when looking at the base rate later this month.”
Rohit Kohli, director at The Mortgage Stop:
“If not now, then when? Surely this is the question that the Bank of England needs to ask themselves when they see this data.
“The economy needs business to start investing again but whilst Threadneedle Street dithers, the risk of a deeper recession will continue to grow.”
Justin Moy, managing director at EHF Mortgages:
“Worsening employment and wage figures point the country towards further financial pain before we see any improvement in the economy.
“It’s another signal that base rate cuts are our quickest route to improvement, not a 2p cut in tax, which has already been lost in mortgage rate increases this week.”
Lewis Shaw, owner and mortgage expert at Shaw Financial Services:
“Does it not seem odd that the unemployment rate is still extremely low by historical standards, annual pay growth is outstripping inflation, and there are still almost a million current vacancies, yet we’re in a recession?
“How can we be at almost full employment, yet GDP per capita is falling?
“Moreover, why is the rate of foodbank usage, the number of children in poverty, and the number of Victorian diseases such as rickets growing?
“The real story is our underlying economy is phenomenally weak, and the sooner the Bank of England cuts the base rate, the better.
“Rampant inequality has fundamentally broken our economy, and it needs addressing—fast.”
Ranald Mitchell, director at Charwin Private Clients:
“Deteriorating labour market data is oddly what rate-cutters need to see, with worsening wage growth adding to the argument.
“These key recession indicators are going to give Bank of England more food for thought for their next base rate decision.
“Inflation data is now critical as we head swiftly towards the tipping point, and when the first base rate cut will come.”
Riz Malik, director at R3 Mortgages:
“I don’t even think the Bank of England knows what it needs to see to start cutting rates.
“The Monetary Policy Committee could give the base rate a short back and sides and still not move the markets massively.
“Regardless of what the Bank of England sees, I would be surprised if they did anything before the Fed or ECB.
“It will be interesting to see what Ben Bernanke’s report says about the competence of our rate setters.”
Gary Bush, financial adviser at MortgageShop.com commented:
“Bad economic news comes riding over the hill to save the day for mortgage holders, potentially.
“The latest unemployment and wage growth data doesn’t read well but will be another reason for a Bank of England base rate hold or, if we cross our fingers, even a rate cut in the upcoming meeting.”
Stephen Perkins, managing director at Yellow Brick Mortgages:
“Wage growth, despite at a lower level than Q4, will continue to apply pressure on the Bank of England to hold the base rate and save reductions until late summer, but with the failing state of the economy, the need for a reduction around mid-year could be stronger.
“If inflation falls as the Chancellor predicted in last week’s Budget, hopefully the first base rate reduction to give respite and relief to millions will be sooner rather than later.”
Robert Timm, managing director at Sunland Mortgages:
“This latest data will place more pressure on the Bank of England.
“Though Threadneedle Street may not reduce the base rate yet, as wage growth has only fallen very slightly, unemployment rising is a red flag.
“There are so many variables at play that it’s hard to know how the Bank of England will interpret this data.”
Graham Cox, director at SEMH Self-Employed Mortgages:
“Wage growth remains stubbornly high at 6.1%.
“Good news for workers, but bad news for anyone looking to get a mortgage, as it gives the Bank of England further justification to keep interest rates unchanged at next week’s MPC meeting.
“The first cut to the base rate may still be some way off.”
Michelle Lawson, director at Lawson Financial:
“This data is even more of a reason to just crack on and bring the base rate down on 21st March.
“This isn’t sustainable and will end up causing more damage than good.
“Sometimes you just have to buck the trend.”
