UK Wage Growth Accelerates, Jobless Rate Falls to 4.7% Ahead of Bank of England Decision

What’s happening

UK wage growth picked up in the three months through August while unemployment fell to 4.7% from 4.9%, according to Office for National Statistics data. The improvement comes ahead of a critical Bank of England meeting and suggests labor market tightness persists despite earlier rate hikes.

Market impact

The data increases pressure on the BoE to hold rates steady or raise further, supporting sterling and UK gilt yields. However, job vacancies continue to shrink as small firms cite labor costs as a key factor in cutting recruitment, signaling early signs of demand destruction.

Broader implications

The UK faces a stagflationary squeeze: wage growth persists while hiring slows, suggesting the labor market is cooling from the demand side rather than supply. The BoE will likely interpret this as justification for maintaining restrictive policy, risking a sharper economic slowdown.