Despite a slight lag behind UK averages, Scotland’s employment rate reached 74.2%, while the unemployment rate dropped to 4.2%.

Ann Frances Cooney, head of employment, Scotland at DWF, said: “The headline figures for this period show the employment rate in Scotland was 74.2%, up 1.2% over the quarter. By way of comparison Scotland’s employment rate was below the UK rate of 74.8%.

“The unemployment rate was 4.2%, down 0.5% over the quarter. Scotland’s unemployment rate was slightly above the UK rate of 4.1%.

“The latest early estimates for August 2024 indicate that median monthly pay for payrolled employees in Scotland was £2,443, an increase of 6% compared to the same period the previous year. This is lower than the annual growth in median monthly pay for the UK over the same period. Employers are continuing to balance demands for increased pay against rising overheads.

Ms Frances Cooney continued: “As we look ahead we are likely to see some caution from employers reflected in the labour market as we await the extensive raft of employment law reform expected from the new government.

“Employers report being particularly concerned about the prospect of ‘day 1 rights’ which, if introduced, will provide employees with protection from unfair dismissal and enhanced rights to request flexible working.

“It will be interesting to see how this could impact decisions about recruitment and workforce expansion as many employers are already taking legal advice with regard to the proposed changes.”

Discussing a potential rate cut by the Bank of England, Kevin Brown, savings specialist at Scottish Friendly, added: “Although we have seen some significant wage growth, it is a sure bet that households still don’t feel better offer thanks to lots of factors confounding the effect of wage increases on budgets.

“Real wage growth persisting for longer is going to continue leaving the Monetary Policy Committee (MPC) with a dilemma – cut rates too quickly and the combined effect with wages rising could cause a fresh price spike. But stick too long and it could risk the better-than-expected economic data being snuffed out by extending interest rate pressures.

“Strong real wage growth is a big puzzle for the MPC, when taken together with a slowing employment market and lower inflation. It could elect to push on with rate cuts to ease the pressure on households and try and stay ahead of the issue for now.

“For those households considering what to do, a rainy-day fund is an essential step if not already in place for emergencies. Beyond that, with rates falling, families should start to consider longer-term plans and whether investing could provide the greater potential for growth now savings rates aren’t as rewarding.”