Hussain Mehdi, strategist at HSBC, said: “The recent hawkish tone from MPC [Monetary Policy Committee] members suggests inflation concerns are now firmly front of mind, lowering the bar for rate increases. A decent October jobs report could open the door to a hike as soon as the December meeting.”
However, there are also signs of slack remaining in the jobs market. Total employment is still down by more than 650,000 on pre-Covid levels, indicating the economy has not yet fully recovered. Self-employment in particular has taken a major blow and has yet to bounce back.
Similarly unemployment is still almost 150,000 above its level in February 2020, with hundreds of thousands more young people now studying instead of working as they extended their education during the pandemic.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said this showed that the Bank of England’s policymakers can hold off hiking rates.
He said: “The economy remains a long way from reaching full employment, suggesting that the MPC will not need to rush through a series of interest rate hikes over the next 12 months to combat domestically-generated inflation.”