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Jobs market, the economy and rates July 23

ended 11. July 2023

This morning, the latest jobs data and wage growth was published. You can find all the reports >> here <<. The important wage growth data is >> here <<. With this in mind, a few questions, the responses to which we will issue to the media shortly after 9am.

  • What are the ramifications of today’s jobs market/wage growth data for interest rates at the next BoE rate decision on 3 August?
  • What does today’s data tell you about the state of the economy and the health of UK businesses?
  • What impact has it had on markets and Sterling this morning (by all means wait until 8am to respond to this one)?
  • How could it impact the property and mortgage markets?
  • What are SWAPS doing on the back of it?

Any other thoughts on any part of the data published this morning that you think are important, send them across.

9 responses from the Newspage community

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Editor
Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Wages grew by 7.3% but only 6.9% including bonuses meaning employers are being less generous with their total remuneration packages. Despite this enormous increase, real pay fell as inflation is so high. Unemployment rose to 4% and the amount of people taking second jobs also increased. Overall, the Bank of England will be fairly happy with the restraint shown in the private sector. As the central bank would welcome a recession to quell inflation, they will also be pleased to see the increase in unemployment.
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Riz Malik
Independent Financial Adviser at R3 Wealth
If somebody has a birthday today or finds a lamp can you please wish for data that supports the case for rates to decrease?

The expectation from the ‘markets’ is that today’s data will signal more rate increases. Curbing wage inflation is just as important as CPI inflation according to the Bank of England and today’s data does not help.
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Editor
Justin Moy
Managing Director at EHF Mortgages
With wage growth continuing to be strong, this will, unfortunately, be interpreted as another reason to keep mortgage rates high. The combination of low unemployment, and the need for business owners to retain quality staff through higher pay, is just pushing this wage inflation at a time household costs are increasing overall - it is the imperfect storm. It does show that this targeted increase to the base rate will not be enough on its own to fight inflation. Continued high rates will significantly slow the property market, and SWAPS will continue to increase without a clear sign of any improvement to our economy.
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Editor
Wes Wilkes
CEO at IronMarket Wealth
Cutting through the noise, the jobs data released today whilst showing some restraint in total remuneration from the private sector, still demonstrates a bloated and tight labour market. This is inflationary, puts the ball firmly back in the Bank of England's court and may lead to further rate rises over the summer.
The market reaction thus far is muted as we wait to see how they may price or re-price the base rate into the end of 2023.
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Michelle Lawson
Director at Lawson Financial
I'm struggling to understand why the BofE and Government can't get a handle on this. During these times, we have already found out that doing things from history has not worked- sometimes there is a bigger picture. Business can't keep picking up the tab of growing costs due to interest rate rises, Corporation Tax rises, employee pay rises due to inflation and the rising costs of living. Something has to give. The increasing interest rates month on month have not impacted on inflation as expected and there doesn't seem to be any significant changes forecast. We are in for some serious troubling times ahead as I think the general public have just about had enough of these relentless troubles one after the other.
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John Choong
Senior Equity Research Analyst at Investing Reviews
This jobs data will translate into more pain for borrowers. Although the unemployment rate ticked up to 4% in May, wage pressures are still showing no sign of easing as average weekly earnings excluding bonuses grew to 6.9% from an upwardly revised 6.7%. This isn't good news for inflation or mortgage rates as it's becoming increasingly likely that the BoE may now have to raise interest rates to an eye-watering 7% to combat a wage-price spiral. Nonetheless, claimant counts in June, which serve as a leading indicator for unemployment, are showing signs that the labour market could be cooling, as the number of people claiming for unemployment benefits rose to 25,700. The number of workers going on payroll also fell by 9000. That said, it's worth noting that these figures are subject to revision and have been wrong in the past. Overall, though, with the UK's inflation rate still the highest in the OECD, the outlook remains bleak for mortgage holders, the UK property market and economy.
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Graham Cox
Director at Bridging Hub
These latest figures illustrate we're in a full-on price/wage spiral, with pay increases failing to keep up with inflation. Adjusted for inflation, total pay fell in real-terms by 1.2% between March and May. Extrapolate that out to a full year and you'd see an almost 5 percent drop in people's incomes.

With mortgages and rent costs soaring, it's clear we're all becoming a lot poorer. The strong correlation between real wage growth, or lack of it, and house prices, also means we'll likely see a sharp fall in property values over the next couple of years. Perhaps 30% adjusted for inflation.
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Paul Welch
Founder and CEO at Largemortgageloans.com
The word 'vicious' has never been more appropriate to describe the relentless cycle of rising inflation and rates currently. The current job data paints a grim picture. Wage inflation, driven by the pressure on the cost of living, is forcing many into a second or third job just to keep the wolf from the door. Simultaneously, mortgage rates are not just walking but running uphill, with 1-year swaps jumping from 5.27% to 6.015% in a mere month, and 5-year swaps flirting with the 5.25% mark. The upcoming core inflation figure could act as a trigger, catapulting these rates even higher if it remains stubbornly high. The only direction we see for rates is up, up, up.
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Mark Grant
Business Finance Adviser at The Business Finance Branch
Today's record wage growth figures, already branded as an ongoing driver of inflation, together with Bank of England governor Andrew Bailey's comments yesterday that they must see the job through to cut inflation will worry businesses and consumers that more interest rate rises are a certainty. For businesses, the combination of further increases in the cost of hiring staff and debt servicing costs will hit confidence around expansion and growth - and in turn, dampen the broader economy.