abrdn: Major test for UK labour market still to come

abrdn: Major test for UK labour market still to come

February 18, 2025

UK Labor force
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Luke Bartholomew, Deputy Chief Economist at abrdn, comments on the unemployment figures announced in the UK this morning.

'The labour market seems to be broadly developing in line with expectations and so is unlikely to move the dial much on the outlook for interest rates. With pay growth still running well above anything close to consistent with the Bank of England’s inflation target, rate cuts will remain gradual for now.

Of course, the big test for the labour market is how it performs following the increase in the national living wage and national insurance this spring. There are clear signs that hiring intentions have cooled in anticipation of these increases, but part of the concern will be how well unemployment data captures this impact in real time given the well-known quality issues with the data. But if growth remains very sluggish there is a clear path to more rapid rate cutting in the second half of the year.'

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