UK hiring picks up as strong US jobs data lifts rate hike prospects

Permanent job placements in the UK increased for the first time since September 2022, coming just days after a US payrolls report that topped forecasts and amplified expectations for a Federal Reserve rate increase.

The timing provides investors an uncommon comparison of the two large economies. Hiring in Britain is displaying initial indications of a shift, while US figures make the Fed's rate trajectory less clear.

Recruiters in the UK Observe a True Shift

The Recruitment and Employment Confederation (REC), which represents UK staffing agencies, together with accounting firm KPMG, monitors permanent placements on a monthly basis. The index reached 50.5 in August, up from July's unchanged level of 50.0, marking the first time it has crossed the no-change threshold in nearly four years.

Billings for temporary roles expanded at the second-quickest rate in over three years.

Vacancies continued to decline, but at the second-slowest rate of contraction in nearly two years. Meanwhile, candidate availability grew at the fastest clip in three months, partly due to redundancies. Starting salaries in permanent hiring posted their biggest increase since January.

US Figures Add Uncertainty to September Fed Meeting

Across the Atlantic, US employers created 162,000 jobs in August, exceeding the 65,000 that economists had predicted by more than double. The unemployment rate remained at 4.1%.

Annual wage growth eased to 3.1%, the lowest in five years, although increases became more widespread across sectors.

The unexpectedly robust data challenged the calm that had settled after Fed official Christopher Waller's rate signal earlier in the week. US equities retreated, with the S&P 500 declining up to 0.4% and the Dow Jones Industrial Average dropping more than 260 points before recovering some ground.

The probability of a hike at the Fed's upcoming meeting, as measured by the CME FedWatch tool — a gauge of futures-implied rate expectations — surged to just below 60%.

Bitcoin (BTC) experienced a similar shock. The cryptocurrency had risen above $80,000 prior to the data release, then fell by as much as 3.5% to $78,649 after it came out.

The Federal Reserve's rate decision is due September 16. If it raises rates, tighter monetary conditions would affect both the US and UK simultaneously, testing whether Britain's fragile hiring recovery and Wall Street's rate-sensitive rally can withstand the same pressure.