The UK jobless rate rose to 5% in the third quarter, the highest since the pandemic, in a sign that the labour market is cooling faster than expected and giving the Bank of England more room to cut rates.
Signs of a slowing economy
According to data from the Office for National Statistics, total employment fell by 22,000 to 34.19mn, while the number of unemployed people rose by 117,000 to 1.79mn. The report showed further weakness in full-time hiring and a slowdown in pay growth, with average earnings excluding bonuses easing to 4.6% year-on-year in October from 4.8% in September.
“Taken together, these figures point to a weakening labour market,” said Liz McKeown, director of economic statistics at the ONS. “The unemployment rate is up in the latest quarter to a post-pandemic high. The number of job vacancies, however, remains broadly unchanged.”
The figures align with the Bank of England’s assessment that wage growth is moderating and unemployment is likely to hover near 5% over the medium term. Business surveys have highlighted that recent increases in National Insurance contributions and the National Living Wage have curbed hiring, with forward-looking indicators suggesting only tepid job creation ahead.
Markets see rate cuts ahead
Last week, the Monetary Policy Committee voted 5–4 to keep the Bank Rate at 4.0%, but the latest data reinforce expectations that policymakers could move to ease at the December meeting.
Money-market pricing now implies an 80% probability of a rate cut next month, up from around 60% earlier in the week, as investors bet that cooling wages and rising unemployment will give the BoE cover to loosen policy sooner than planned.
