UK economy withstands end of jobs support, easing BoE worries

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LONDON (Businesshala) – Britain’s job market ended the government’s furlough scheme last month, according to data that could ease concerns at the Bank of England about the risks of lowering interest rates from its pandemic.

FILE PHOTO: Workers travel by London Bridge Rail and Underground station during peak morning hours in London, Britain, September 8, 2021. Businesshala/Toby Melville/Files/File Photo

The number of employees on businesses’ payrolls in October increased from 0.8% in February 2020 before the coronavirus pandemic hit, and increased by 160,000 in the month.

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The Bank of England is watching closely as unemployment rises after the job-protecting furlough scheme ended in late September.

Ambrose Crofton, global market strategist at JPMorgan Asset Management, said: “Now that today’s labor market data shows that the hurdle is over, we think the Bank of England will need to raise interest rates at its December meeting. Got the green light for it.” ,

The BoE’s next monetary policy announcement is scheduled for December 16.

But Andrew Goodwin at Oxford Economics, a consultancy, said the BoE may need more time to assess the strains many consumers are facing from inflation of around 5% in April, when workers are also subject to higher taxes. will have to pay.

“While a full assessment of the cost of living challenges facing households and the end of furloughs arguably requires several months of data, we think the MPC will delay rate lift-off until February,” Goodwin said.

The Office for National Statistics said it is possible that people who were redundant at the end of the furlough scheme would continue to appear in the data as work for a few more months while they worked their notice period.

“However, the responses to our trade survey suggest that the numbers that have become redundant at the end of September 2021 are likely to still account for a small proportion of those on leave,” the ONS said.

unemployment rate down

Official data published by the ONS on Tuesday showed that the unemployment rate fell more than 4.3% from earlier expected to 4.5% in the three months to September, the lowest in the three months to July 2020.

Employment increased by 247,000 in the July-September period, more than the 185,000 projected increase in a Businesshala poll, while the number of unemployed fell to 152,000.

The ONS said the average weekly earnings in the July-September period were up 5.8% compared to the same three months of 2020, the smallest annual increase since April.

Excluding bonuses, earnings were up 4.9% from a year ago, the smallest increase in the three months to March.

The ONS estimates the underlying pace of wage increases – taking into account workers going back to full wages after furloughs and job losses during the coronavirus lockdown fell the most on low-wage workers – with respect to wages excluding bonuses. ranged between 3.4% and 4.9%. ,

BoE Governor Andrew Bailey has said Tuesday’s jobs data and another release in four weeks’ time will be crucial to the central bank’s thinking about whether to raise the bank rate for the first time since the pandemic.

“Anecdotes suggest that exiting the furlough scheme hasn’t increased unemployment, but we don’t really know the full story,” Bailey told lawmakers on Monday. But he said he thought the labor market was “quite tight”.

Tuesday’s data showed job vacancies hit an all-time high of 1.172 million in the three months to October, nearly 400,000 more than before the pandemic, though growth slowed again.

The Resolution Foundation, a think tank, said it was taking an employer, on average, only a month and a half to fill a vacancy, matching the record-quick time seen before the pandemic.

“This suggests that record vacancies are being driven to reopen the economy, instead hiring employees impossible as some have suggested,” it said.

Employers in some sectors, such as food processing and road transport, say post-Brexit restrictions on EU workers are making it harder for them to fill positions.

Reporting by William Schomberg and David Milliken; Editing by Andrew Havens and Nick McPhee

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