"When wage growth slows without a corresponding fall in unemployment, markets can be expected to read that as a loss of momentum. Investors focus on inflection points rather than absolute levels. After a period where the labour market had been gradually tightening, today's data suggests that process may be stalling. It matters because wage growth underpins consumption, earnings visibility, and confidence in domestic demand."
"Softer pay growth usually feeds directly into lower growth assumptions. Chancellor Rachel Reeves has emphasised fiscal discipline and credibility as the cornerstone of Labour's economic strategy. This positioning initially reduced uncertainty and helped stabilise sentiment. However, markets are now likely to shift their focus from reassurance to outcomes. Credibility buys patience, not permanent support, says Nigel Green. Once the data stops improving, markets start asking what's supposed to drive the next phase of growth."
Average pay excluding bonuses eased in the three months to November while unemployment remained at 5.1%, indicating cooling wage growth. Slower pay growth without a corresponding fall in unemployment suggests a stalling in labour-market momentum and reduces visibility on earnings and domestic demand. Investors tend to focus on inflection points, so these signals can alter asset pricing and shift market attention from fiscal credibility to measurable economic outcomes. Softer wage pressure may weaken the pound’s relative growth case and reinforce expectations that underlying growth remains fragile, affecting sterling and gilt market sentiment.
Read at London Business News | Londonlovesbusiness.com
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