PwC comments on May 2024 ONS labour market data

Commenting on the latest ONS labour market data, Jake Finney, economist at PwC UK, says:

“The latest labour market data provides further evidence that the labour market is cooling, as interest rate rises continue to weigh on demand for labour. The unemployment-to-vacancies ratio, a key indicator of labour market tightness, has increased to 1.6, its highest level since mid 2021.

“The Bank of England has indicated that labour market tightness is a key parameter when determining the timing of the first rate cut. On balance, the latest data provides further evidence that the labour market is loosening. This would point towards the first rate cut coming in June or August, likely ahead of the Fed, as there are greater domestic inflation pressures in the US.

“The one upside for households is that easing inflation pressures means that pay levels continue to grow in real terms. With inflation set to return to the Bank of England’s 2% target in the next couple of months, our expectation is that workers could see their pay grow in real-terms throughout 2024.”