- By Michael Race
- Business reporter, BBC News
Image source, Getty Images
The UK’s job market is showing signs of weakening, suggesting businesses are feeling the impact of rising prices and high interest rates.
The unemployment rate was 4.2% between June and August, up from 4% in the March-to-May quarter but unchanged from last month.
UK economic growth proving sluggish in recent months.
The current economic picture has fuelled expectations that interest rates will be left unchanged.
The Bank of England, which sets UK rates, will decide in November whether to increase, decrease, or keep rates at 5.25%.
It decided to leave its benchmark rate unchanged at its previous meeting after 14 consecutive rises, with governor Andrew Bailey saying there were “increasing signs” that higher rates were starting to hurt the economy.
The Bank first started to increase interest rates in December 2021 to slow the rate consumer prices were rising – which is known as inflation.
But it is a balancing act as raising rates too high can lead to businesses to halt investment plans or make cutbacks and stifle economic growth, which can lead to a recession.
The UK is not currently in recession but there have been concerns over weak growth, with the economy set to be a key area in the election which is widely expected next year.
Mel Stride, Secretary of State for Work and Pensions, said growing the economy was a “priority” and that the government was “bringing in the next generation of welfare reforms to drive down inactivity and help more people into work”.
He said there were now “more than one million more people on company payrolls compared to 2019, a near record high, and today’s statistics also show inactivity has fallen by over a quarter of a million since the pandemic peak”.
But Liz Kendall, Labour’s shadow work and pensions secretary, said the statistics confirmed “once again that the Tories’ dismal mismanagement of our economy is failing Britain”.
Compared to the job numbers released last month, the figures released on Tuesday have been calculated slightly differently by the Office for National Statistics (ONS) in an attempt to try to make the data on jobs as reflective of the world of work as possible.
The ONS has taken the jobs figures published in July and updated them by the fall in the number of people employed by companies.
This misses self-employed people, but the ONS says the changes for both types of employment track together in the short term. They have also used Universal Credit claimants to update the unemployment figures.
The ONS estimated employment in the UK slightly decreased to 75.7% between June and August.
Ashley Webb, UK economist at forecaster Capital Economics, said the latest jobs figures indicated the labour market was “still loosening, although quite slowly”.
“As a result, the Bank will probably continue to believe that interest rates are gradually doing their job and, in our view, it is unlikely to raise interest rates again,” he said.
