Reports have emerged that the UK’s job market is showing signs of weakening as businesses cope with the impact of increasing prices and high interest rates. Unemployment has risen to 4.2%, up from 4% in the March-to-May quarter, but remains at the same level as last month. The economic picture in the UK has been sluggish in recent months leading to expectations that the Bank of England will keep interest rates at their current level of 5.25%.
As the Bank of England ponders its decision about whether to increase, decrease or maintain interest rates, concerns centre on the 14 consecutive rises in interest rates that have already taken place, with Governor Andrew Bailey cautioning that these higher rates were having an impact on the economy. The Bank initially began increasing interest rates in December 2021 to address the increasing rate of inflation, although it is a balancing act as raising rates too high could impact on business investment plans and stifle economic growth leading to recession.
The latest figures for the UK economy show a return to growth in August following a sharp fall in July, but economists paint a picture of the economy “only just grinding forward.” Although the UK isn’t currently in recession, concerns continue over weak growth and the economy is expected to become a key area in the UK’s upcoming general election next year.
The government remains eager to grow the economy with Secretary of State for Work and Pensions, Mel Stride, announcing that “the next generation of welfare reforms” would be introduced to drive down inactivity and increase employment rates. Nevertheless, Liz Kendall, Labour’s shadow work and pensions secretary, was critical of the latest statistics arguing they “confirmed once again that the Tories’ dismal mismanagement of our economy is failing Britain.”
The latest job numbers have been calculated differently by the Office for National Statistics (ONS) in an attempt to reflect the reality of the world of work more accurately. The ONS has updated the figures of jobs published in July by the fall in the number of people employed, missing self-employed data but stating that this is showing a similar trend in the short-term. They have also used the number of Universal Credit claimants to update unemployment figures.
Economists are now suggesting that the labour market is “still loosening, although quite slowly,” indicating the need for caution, with the Bank likely to continue believing that raising interest rates gradually will produce the desired effects and stave off further economic issues
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