UK workforce withdrawals drop unemployment to lowest point since 1974

By bfnadmin  | Date: 2022-09-15

UK workforce withdrawals drop unemployment to lowest point since 1974

Britains unemployment rate has reportedly dropped to its lowest level since 1974 as more people left the corporate environment, exerting upward pressure on wages.

According to the government, 3.6% of adults were unemployed or looking for employment in the three-month period that ended in July, down from 3.8% in the previous three months, while economists had anticipated no change.

While the report also showed salaries rising considerably beyond the pre-pandemic average and long-term sickness reaching a new high. Moreover, the data revealed that there is less opportunity for the economy to grow without driving wages and prices above the 2% target by the Bank of England (BOE). This further adds to the pressure on policymakers to continue rising interest rates.

Head of policy at the British Chambers of Commerce Jane Gratton stated that the cost of resolving business problems during crisis is growing rapidly, as firms struggle to stay afloat during a period of spiraling expenses and are also confronted with an exceptionally tight labor market, further limiting their ability to spend and grow.

Additionally, investors expect the central bank to raise the key lending rate by at least 0.05% from 1.75% next week, with a possibility that the BOE will enforce a three-quarter point rise.

Officials led by Governor Andrew Bailey have stated that they are willing to act forcefully to curb inflation, which has reached double digits for the first time in 40 years.

According to Kitty Ussher, chief economist at the Institute of Directors, low unemployment means that labor shortages continue to be a major issue for businesses. However, today's data also implies that some employers are delaying hiring plans in the face of a shrinking economy.

Surprisingly, the fall in the unemployment rate was caused by a significant increase in the number of people classified as economically inactive, or not looking for work. A total of 194,000 persons left the workforce, the largest since the pandemic began, part of this was attributed owing to increased disease levels. Moreover, young folks who were working returned to higher education.

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