Another Rate Cut By BOE Next Week?

Bank of England

UK employment plunged by the most in five years and wage growth slowed more than forecast, as the labour market deteriorated after Chancellor of the Exchequer Rachel Reeves ramped up the cost of hiring.

The UK labour market conditions continued to weaken in the three months to Apr-24 as the jobless rate increased to 4.6% (Mar-25: 4.5%), in line with market expectations. The rise represents the highest level since the three months to Aug-21, driven by a rise in both short-term unemployment (up to six months) and long-term unemployment (over 12 months).

The increase reflected the slowdown in the job market following the impact of the Reeve’s Budget, which significantly increased the cost of hiring. During the month, employment in the UK recorded its smallest gain this year with an increase of +89K (Mar-25: +112K), mainly affected by a decline in full-time self-employed workers. Meanwhile, May-25 number showed more weakening as the number of payrolled employees fell sharper by -109K (Apr-25: -55K), bringing the total to 30.2m, recording the seventh consecutive monthly drop and at the fastest decline since May-20. The accommodation and food service sectors recorded the biggest decline of -124K.

On a separate data release, the UK wage growth eased as regular pay excluding bonuses moderated by +5.2%yoy in the three months to Apr-25 (Mar-25: +5.5%yoy), marking the softest growth in seven months. Adjusted for inflation, real wages still grew by +1.4%yoy. The public sector pay growth rose slightly by +5.6%yoy (Mar-25: +5.5%yoy), while the private sector recorded a sharper slowdown of +5.1%yoy (Mar-25: +5.5%yoy).

Looking ahead, MIDF Research expects the UK job market to remain weak as firms will likely stay cautious about hiring and replacing departing staff. Rising National Insurance contributions, a higher minimum wage, amid global trade tensions are adding to cost pressures faced by employers. The house said these points to continued economic sluggishness, raising the chances for another rate cut by the Bank of England next week. 

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