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Rising unemployment: "Our economy needs a shot in the arm and Threadneedle Street can deliver it by cutting rates."

ended 12. March 2024

Following this morning's labour market data, which showed annual growth in regular pay, excluding bonuses, slowed to 6.1% in the three months to January, and that the rate of UK 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. Their views are below.

14 responses from the Newspage community

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Darryl Dhoffer
Founder at The Mortgage Geezer
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.
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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.
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Craig Fish
Director at Lodestone Mortgages
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.
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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.
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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.
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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.
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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.
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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.
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Ranald Mitchell
Director at bad credit mortgage specialists Charwin Mortgages
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.
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Riz Malik
Independent Financial Adviser at R3 Wealth
I don’t even think the Bank of England knows what it needs to see to start cutting rates. The Monetary Polucy 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.
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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.
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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.
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Graham Cox
Director at Bridging Hub
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.
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Gary Bush
Financial Adviser at MortgageShop.com
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.