The era of data dependence: Can a correction rewrite the Bank of England's November decision?

The performance of the UK labor market: payroll employment fell by only 8,000 in June-July, job vacancies were generally lower than before the epidemic, private wages rose by 4.8% annually and weakened momentum, falling to 4% during the year. The analysis is mostly based on the November interest rate cut, but the partial eagle communication makes decision-making highly data-dependent; if "stronger employment + higher inflation", the interest rate cut may be postponed until early next year.

The labor market: cooling but not disorderly

Payroll employment in the UK fell by just 8,000 between June and July, the eighth decline in the past nine months and the smallest. The final figures for July do not rule out a slight increase, given the historical pattern of upward revisions in payroll caliber. Business surveys over the same period showed a marginal improvement in willingness to hire since the spring "cold spell", with adjustments in labour demand shifting from acute to more modest rebalancing.

This coincides with two major shocks since April: the increase in national insurance has raised labor costs, the increase in the national living wage has compressed the profits of low-wage-intensive industries, and superimposed demand rebalancing. The loss of jobs in the past 12 months has mainly been concentrated in the hotel and catering industries. It is worth noting that the government has not received a significant increase in the advance notice of large-scale layoffs; small and micro enterprises prefer to deleverage through natural attrition, reducing working hours and freezing recruitment. This "silent" contraction weakens the impact of unemployment on the macro, making the "cooling is not out of order" more obvious.

Salary and job vacancies: key clues to stickiness relief

Structural indicators continue to weaken: job vacancies are below pre-epidemic levels in almost all sectors, and the decline in overall vacancies has not slowed significantly. According to Indeed, the UK has seen a much larger decline in job vacancies than in the US, France and Germany before the epidemic. Although the official unemployment rate has risen this year, its caliber has long been questionable, and the directional judgment of "loosening" cannot be refuted alone.

The macro implication is that the momentum of wage expansion will continue to cool. The latest private sector regular wage growth was maintained at 4.8% annually, but the monthly momentum has been significantly moderate. If the current trend is carried forward, it is expected to fall back to 4% or lower this year. For the inflation path, this means that the cost pressure of services is expected to gradually weaken, but follow-up data is needed to confirm whether the transmission is smooth, and whether companies have delayed the actual implementation of wage cooling by raising prices to maintain profits.

Policy path: November interest rate cut as a benchmark but subject to data constraints

Under a combination of "weaker employment margins but no systemic deterioration, falling job vacancies, and easing wage stickiness", the Bank of England has room to cut interest rates in November without sacrificing inflation target credibility, which constitutes a baseline scenario. However, the hawkish communication released at last week's meeting increased the reliance on follow-up data, indicating that policymakers are waiting for clearer verification of wage and services inflation.

A combination of "better-than-expected employment and better-than-expected inflation" would leave November on hold, pushing interest rate cuts to early next year. Conversely, if wage and service inflation continue to fall, the rate-cutting window will be more secure. For traders, the source of policy uncertainty shifts from "direction" to "rhythm", and the weight of timing increases.