• Prior 5.1%
• Employment change 52k vs 94k expected
• Prior 82k
• Average weekly earnings +4.2% vs +4.6% 3m/y expected
• Prior +4.7% (revised to 4.6%)
• Average weekly earnings ex bonus +4.2% vs +4.2% 3m/y expected
• Prior +4.5% (revised to 4.4%)
• January payrolls change -11k
• Prior -43k (revised to -6k)

As a general reminder, the UK labour market report is still one plagued by data quality issues. And that looks set to continue further as outlined here: UK statistics office evaluates potential delay to its overhauled jobs survey – report

We have softer than expected figures across the board here, but as mentioned earlier, the data is unlikely to change much for the BoE as it already projected more weakness and more rate cuts ahead.

Today’s report should solidify expectations for a rate cut at the next meeting though. Traders were already pricing a 70% probability, so that will likely rise to 80% or even 90% when the market opens.

MARKET REACTION

The British pound dropped across the board as traders firm up expectations for an imminent rate cut. The market was pricing a total of 48 bps of easing by year-end which is likely to increase slightly after the employment data. If we see more weakness in the next months, we should see traders pricing in even more rate cuts than currently expected.