UK Jobs Market Cooling Down Fuels Doubts Over Rate Hikes

The UK jobs market is showing signs of slowing down, which has implications for the Bank of England's interest rate decisions. Private sector payrolls fell by 34k in August, a year-on-year decline of 0.8%. The consumer services sector, including retail and hospitality, is particularly affected, with job numbers falling at an annualized rate of over 3%.

Wage growth across the private sector remains weak, but has reached a floor of 2.9%, according to recent data. However, this still aligns with the Bank of England's medium-term inflation target of 2%. The government's decision on next April's National Living Wage rise will also have an impact on wages.

Despite concerns about severe second-round effects from higher energy prices, the Bank of England's doves are becoming increasingly confident that this is unlikely. As a result, another rate hike later this year cannot be ruled out if energy prices stay high.