S&P Global's UK purchasing managers' index points to a 24th month of workforce reductions, a run that now surpasses the duration seen during the global financial crisis. Even so, overall activity is still expanding: the composite PMI came in at 52 in September, a notch lower than August's 52.5 but slightly stronger than the flash reading of 51.7 and comfortably above the 50 threshold that separates growth from contraction.
Labor data turns before the headline economy does, which is why it is worth watching closely. Market Briefs reads the jobs numbers free every morning.
This soft patch is a headache for Andy Burnham's government heading into the budget later this month, with an intensifying energy shock and artificial intelligence weighing on hiring plans. Headcount cuts have persisted since Labour's 2024 return, when the government raised payroll taxes as well as the minimum wage soon after taking office. The outlook has also dimmed after energy prices jumped last month, a move that has traders increasing wagers on the Bank of England delivering multiple interest rate hikes to contain broader inflation pressures. The survey signaled that costs and selling prices rose at the fastest pace since June.
Despite the labor-market drag, the broader private sector is still holding up against the energy squeeze for now, helped by sturdier household spending and demand for tech services amid a race to put AI to work. In services, job cuts narrowed to their lowest in nearly a year, hinting the slump could be stabilizing. Britain's official jobless rate also sits well below levels seen after the GFC. According to S&P Global Market Intelligence's economics director, Tim Moore, "Subdued demand conditions and rising inflationary pressures contributed to weaker business activity expectations for the year ahead." "Greater-than-expected business requirements seem to have helped to stem the jobs downturn in recent months." Put together, that is a tricky mix: cooler hiring alongside firmer price pressures can keep rate expectations jumpy, which feeds into what you pay on mortgages, the mood around UK equities, and the appeal of cash-like yields.
A long hiring slump reaches wages, spending, and rate decisions in that order. Get the free Market Briefs daily newsletter and follow it.
