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UK Unemployment Rises As Job Market Stalls

By Nithya Bose in Business News, posted April 17, 2024

The UK labour market is experiencing a slowdown, with unemployment rates rising and job vacancies decreasing, recent statistics reveal.

The BBC reported that between December and February, the unemployment rate escalated to 4.2 percent.

This was a six-month high and exceeded analysts' predictions of reaching four percent.

The employment rate slightly dipped, and the count of those economically inactive—neither working nor seeking work—increased, particularly among people aged 16 to 34.

This uptick in unemployment and economic inactivity comes amid ongoing debates about the economic strategies employed by the government.

Critics point to the health sector's struggles as a factor impeding the country's economic recovery.

The increase in long-term sickness among the workforce has sparked discussions on the need for more robust health services.

This has been exacerbated by conditions like long Covid.

Economists say the labour market trends could be catalysts for the Bank of England to consider a reduction in interest rates as early as this summer.

This measure is anticipated to alleviate some economic pressures by potentially encouraging more investment and spending.

ONS: "Tentative signs that the jobs market is beginning to cool"

Paul Dales, a leading economist at Capital Economics, said: "With employment falling sharply and the unemployment rate climbing, we suspect wage growth will continue to ease in the coming months.

"That may allow the Bank to cut interest rates in June."

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Yael Selfin, chief economist at KPMG UK, added: "Easing pressure in the labour market keeps the Bank on track for a summer rate cut."

The Office for National Statistics (ONS) said there are "tentative signs that the jobs market is beginning to cool".

Real wages adjusted for inflation have seen the highest growth since late 2021.

This improvement is contrasted by the static income tax thresholds, which could lead to higher tax burdens as wages increase.

These fiscal policies are under scrutiny as they may counteract the benefits of wage increases and tax cuts, like the recent reduction in National Insurance.

The rising figures of those out due to long-term sickness are highlighted as a significant economic and social concern.

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