UK hiring slows in October while starting pay rises faster

what happened

Britain's labour market lost some momentum in October, according to a monthly survey of recruiters conducted by the Recruitment and Employment Confederation and KPMG, as reported by Reuters. The index for permanent placements dropped to 46.6 from 50.9 in September, its lowest level since May and the first decline in four months. Temporary staffing also contracted, sliding to 48.9 from 50.9 and marking the first fall since March. Starting salaries for permanent positions, however, climbed at a quicker pace.

The poll covered around 400 agencies and ran from October 12 to 26. It showed candidate availability inching higher and permanent vacancies shrinking at the slowest rate since August 2024, while temporary vacancies edged up. Jon Holt of KPMG said firms were still weighing whether the Budget offered enough stability, and cautioned that signs of a jobs recovery could stall as the Bank of England tightens and inflation picks up.

The Bank of England raised its base rate by a quarter point to 4% last week, and policymakers warned that another increase is likely if the US-Iran conflict persists. Investors are pricing in at least two quarter-point hikes in 2027. The survey was carried out before Finance Minister John Healey presented his first annual budget on October 28, which analysts said had little effect on the growth and inflation outlook.

why it matters

For sterling and gilts, the path of interest rates is the key issue. Hawkish signals from the central bank support yields and the pound, while cooling hiring points to softer demand that could limit further increases. The combination of weaker employment and faster wage growth leaves the Bank of England with a difficult choice.

market impact

Pound and gilts: weaker hiring weighs, while faster pay growth and hawkish signals lift expectations

• ↔sterling mixed — firm rate-hike expectations support it, while slowing hiring limits the gain
• ↔UK gilts mixed — faster wage growth lifts rate expectations, but a cooling jobs market pulls them back

tags

instruments