U.K.'s Labor Market Continues to Slacken, Says Deutsche Bank

07:54 AM EDT, 10/14/2025 (MT Newswires) -- There will be plenty of ammunition for the doves in Tuesday's labor market report in the United Kingdom, said Sanjay Raja, Deutsche Bank's chief U.K. economist.

Wage growth continues to soften -- particularly in the private sector, with AWE Private Regular Pay pulling lower to 4.4% (three-month/over/year-on-year). The jobless rate edged higher to 4.8%. Vacancies dropped to a new multi-year low (717,000 in the three months to September 2025). Payrolls shrank by 10,000 and jobless claims rose by 25,800.

While all data is subject to revision -- and should be taken with a pinch of salt -- one thing is clear: slack continues to build in the labor market, state Raka. Wage pressures are easing on the back of a softening labor market. And hiring plans remain stalled.

Worryingly for the Bank of England's Monetary Policy Committee (MPC), the single-month jobless rate pushed as high as 5.3% in the three months to August -- that's the highest rate Deutsche Bank has seen since 2015 as redundancies rose by 113,000 over the same period.

Put simply, the jobs market is just not keeping up with rising labor force participation, added the bank's economist. Tuesday's data should give the doves some ammunition while providing the centrists on the MPC some food for thought.

The consumer price index is expected to rise near 4% year-over-year in September, but medium-term dynamics point to weaker price momentum, according to Raja. Wage bargaining power has softened. And private sector pay settlements should land comfortably around 3% next year.

Bottom line, Deutsche Bank continues to think that a Q4 2025 rate cut may be underpriced by markets. The bank holds onto its view for a December 2025 rate cut.

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