The UK labour market remains resilient in the face of economic slowdown, with unemployment holding steady at 4.7% in the three months up to July.

Average weekly earnings decreased to 4.8% year-on-year, but this remains higher than the Bank of England would like, underlining that pay pressures remain intense across the private sector. Wages are continuing to rise despite vacancy numbers continuing to edge lower. After declining for three years, it was expected that vacancies would bottom out at pre-pandemic levels, but they are continuing to drop below this level.

This persistence in wage growth could keep services inflation higher for longer, leaving the Bank of England in a holding pattern on interest rates. The Monetary Policy Committee is expected to keep rates unchanged on Thursday, waiting for clearer signs that inflation is on a sustained path back to 2% and wage growth is under control.

The data also sets the stage for the Autumn Budget, where the Chancellor faces a delicate balancing act — whether to loosen fiscal policy to support growth or hold back to avoid stoking inflation further. With the labour market still running hot, calls for fiscal restraint will meet resistance from those urging the Government to reignite the economy.

Professor Joe Nellis is economic adviser at MHA, the accountancy and advisory firm.