Job Market Stagnates and Interest Kept at All Time Low

Helen Cobain – Job Centre Plus, Solihull

Following Brexit, the jobs market stagnated in the three months to October, according to the Office for National Statistics.

It has been suggested that employers are starting to slow down the rate in which they are hiring following June’s Leave vote.

Employment saw its first decline since June 2015, as it fell by 6,000, which is only the fifth fall registered in the job market since 2011. This was an unexpected turn of events as City of London analysts had expected to see employment rise by 50,000 in the three months after Brexit.

The Bank of England and the Office for Budget Responsibility have both predicted that the unemployment rate will begin to rise as soon as the economy starts to slow down and firms begin to cut back on hiring.

The Bank expects the jobless rate to rise to 5.6 per cent in two years’ time – post Brexit – while the Office for Budget Responsibility argues that it will peak at 5.5 per cent in the same amount of time.

Photo by George Rex

The unemployment rate was steady at 4.8 per cent, equal to the 11-year low hit last month. Unemployment, however, rose by 2,400 in November following a 13,300 increase in October.

James Knightley of ING stated, “The UK has experienced a rapid deterioration in job creation, giving the sense that Brexit uncertainty is now becoming a drag on the economy.”

Howard Archer of HIS Global Insight agreed, saying, “Cracks are beginning to appear in the labour market.”

Official forecasters predict that inflation will outstrip wage growth in 2017, therefore reducing real disposable incomes and consumer spending.

The average wage rose by 2.5 per cent in the three months following Brexit, which is the strongest increase since August 2015.

Consumer price inflation rose by 1.2 per cent in November, the fastest rise in the cost of living since 2014.

Job vacancies, which also indicate momentum in the market, fell to 748,000 in the three months to November, a significant decrease from the 757,000 in the three months to October.

Philip Shaw of Investec said, “The economy will not be weak enough to justify an easing into monetary policy, while the rise in inflation is unlikely to be sufficiently long lasting to prompt a tightening.” He stated, “Accordingly, the most likely outlook is that the MPC will maintain the Bank rate at 0.25 per cent through 2017.”

The Bank of England has, as predicted, left interest rates at their record low of 0.25%, but have repeated an issued warning that higher inflation and slower wage growth risk squeezing household budgets and spending in 2017.

Minutes before the final meeting of the year, the MPC said it would continue to trade off the effects of a weaker pound following Brexit, raiding inflation against the prospects of economic growth and employment slowing.

The Bank’s minutes said there could be ripple effects for the rest of the global economy.

 

Emily Stephens

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