The UK unemployment rate rose to 5.1% in the three months to October, the highest since early 2016 when excluding pandemic effects, signaling a weakening labor market.

Weak hiring activity was especially evident among younger workers and in hospitality and retail, which employ many youths.

Payroll employment fell by 38,000 in November to 30.3 million, signaling a softer jobs market.

Chancellor Reeves’ budget measures, including relief across energy, fuel, rail, and prescriptions, are seen by analysts as helping to lower inflation and support a rate cut.

Wage growth remains positive but is easing, affecting consumer spending power and inflation dynamics.

The Bank of England had held rates at the prior meeting, with some debate over a 25 basis point cut and a potential shift in Governor Bailey’s stance if data stay soft.

A Labour-led government context is noted, with promises to protect workers and grow the economy; the budget contributes to expectations of cost pressures and inflation dynamics.

Analyst Suren Thiru warns of a challenging winter from higher business costs and weaker demand, reinforcing expectations for a rate cut.

Wage pressures have not meaningfully eased, with elevated pay settlement projections for 2026 despite softer overall pay growth.

The data sits amid budget scrutiny and potential tax changes, with calls for fiscal measures and concerns about the budget’s employment impact.

Many economists argue the data support a BoE rate cut as slower wage growth and softer hiring ease inflation pressures; markets see a likely move from 4.0% to 3.75%.

Overall market interpretation is mixed but leans toward easing policy to address cooling wage growth and weaker labor market momentum.