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THE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & LifestyleTHE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & Lifestyle

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UK Job Market Cools: Bank of England Concerns Persist

UK Job Market Cools: Bank of England Concerns Persist
File Photo: White Collar: Definition, Types of Jobs, and Other "Collar" Types File Photo: White Collar: Definition, Types of Jobs, and Other "Collar" Types
UK Job Market Cools: Bank of England Concerns Persist
File Photo: White Collar: Definition, Types of Jobs, and Other "Collar" Types File Photo: White Collar: Definition, Types of Jobs, and Other "Collar" Types

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UK Job Market Cools: Bank of England Concerns Persist

The latest data from the Office for National Statistics (ONS) revealed a moderation in the inflationary pressures within Britain’s labor market, offering a degree of relief to the Bank of England. However, underlying challenges persist, with wage growth remaining robust and a concerning trend of workforce dropouts.

While core wages saw their slowest increase since mid-2022 in the three months to February, they maintained strength relative to historical standards. Regular wages, excluding bonuses, a key metric watched by the BoE regarding interest rate decisions, grew by 6.0% compared to the previous year, slightly lower than the 6.1% rise in the preceding three-month period.

Despite economists forecasting a sharper slowdown to 5.8%, the unemployment rate unexpectedly rose from 3.9% to 4.2%, signaling a potential loss of momentum in the job market. However, the ONS cautioned that it was still refining its survey methodology, introducing a degree of volatility to the figures.

Yael Selfin, chief economist at KPMG UK, interpreted the rise in unemployment and the deceleration in pay growth as indicative of reduced inflationary pressures in the labor market. This development may provide some reassurance to the Bank of England, which closely monitors wage data as a key indicator of domestic inflationary trends.

In response to the data, sterling briefly weakened against major currencies, and expectations of BoE rate cuts in 2024 were scaled back, with the first reduction in bank rate now fully priced in for September.

Total pay growth, including bonus payments, remained steady at 5.6%, defying expectations of a slight slowdown to 5.5%. Strong pay hikes have alleviated financial strain on households, a welcomed development for Prime Minister Rishi Sunak, particularly amidst faltering opinion poll ratings ahead of an anticipated election this year.

However, concerns linger regarding the persistently high rate of inactivity in the labor market, which reached its highest level since mid-2015, and the surge in long-term sickness registrations, which hit a record high since records began in 1993.

The Confederation of British Industry (CBI) highlighted the dichotomy within the labor market, with rising unemployment and persistent inactivity juxtaposed against a notable number of unfilled job vacancies, contributing to accelerated wage growth that may not align with significant interest rate cuts.

Vacancies continued to decline for the 21st consecutive quarter, albeit remaining elevated above pre-pandemic levels. Jack Kennedy, senior economist at jobs platform Indeed, emphasized sustained high wage growth and its implications for inflation persistence, suggesting that the prospects for UK rate cuts before autumn are uncertain.

The recent increase in Britain’s minimum wage for workers aged 21 and above has further fueled concerns among employers, potentially impacting hiring practices and pricing strategies. Demand for staff has waned for the fifth consecutive month, according to the Recruitment and Employment Confederation, signaling ongoing challenges in the labor market amid evolving economic conditions.


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