UK’s strong labour market cools and salary is being eaten by inflation

Synopsis

Despite the Bank of England’s predictions that the economy is likely to enter a recession later this year, the unemployment rate for the three months ending in June was unchanged from last month’s data at 3.8%, which is close to a half-century low. In official figures released on Tuesday, Britain’s record-hot labour market showed symptoms of cooling as companies grew more selective in their recruiting decisions and employees saw a record decline in their basic pay after accounting for skyrocketing inflation.

Despite the Bank of England’s predictions that the economy is likely to enter a recession later this year, the unemployment rate for the three months ending in June was unchanged from last month’s data at 3.8%, which is close to a half-century low. The number of persons in the labour force increased by 160,000 between April and June compared to the previous quarter, which was far fewer than the 256,000-increase predicted by economists in a Reuters survey. A small increase in the number of unemployed persons was caused by people entering the labour force again to look for work.

For the first time since mid-2020, job openings in the three months leading up to July decreased, but they still hovered around a record high at 1.274 million. According to economist Jake Finney of the accounting firm PwC, the unemployment rate will likely remain under control as long as there aren’t enough qualified candidates to fill open positions. Even while hiring initiatives are waning, he stated, “we anticipate the unemployment rate to stay largely constant for the remainder of this year.” “UK businesses are more prone to hoard than to shed labour when facing labour shortages.” The BoE predicts that the unemployment rate won’t climb until mid-2023, when it will then grow to 6.3% in three years.

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