"Sizeable Rise" in Unemployment Due Next Month: Lloyds Bank

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The UK will record a "sizeable rise" in inflation next month, warn economists at Lloyds Bank.

The call comes after the ONS said the UK unemployment rate fell to 4.0% in August from 4.1% in July, below expectations for another print of 4.1% and defying surveys that point to a loosening in employment conditions.

Lloyds Bank economist Nikesh Sawjani says ongoing issues with the collation of employment figures at the ONS are likely behind August's flattering picture. "These results are likely to be treated with caution."

He explains that because the data is collated on a rolling three-month basis, a standout print from June has distorted the figures. June's 3.7% rate contrasts with the 4.3% average for every other month of the year.

"This means next month's report, covering the three-months to September should show a sizeable rise in the unemployment rate as the June data rolls out of the window," says Sawjani.

In addition, more timely surveys of the labour market point to the official measure of unemployment picking up in the near future. For example, the KPMG/REC survey is now pointing to an outright increase in unemployment:

Wage growth continues to moderate, falling to 4.9% in the year to June-August 2024. Including bonuses, it was up 3.8%.

"This is clearly good news for BoE policymakers looking for signs of easing in inflationary pressures. However, the pace of wage growth is still probably too high to be consistent with the BoE's 2.0% inflation target on a sustainable basis.