LONDON — Responding to the latest UK labour market figures, released by the Office for National Statistics today, Suren Thiru, ICAEW Chief Economist, said:
“These figures point to a jobs market struggling under the strain of soaring energy bills and employment costs, with more firms limiting hiring and holding down pay, especially for younger workers.
“Weak wage growth offers a silver lining for rate-setters by raising hopes that any inflationary spillover from the Iran war will be limited, especially as rising unemployment will help keep pay settlements heading downwards.
“This fresh fall in job vacancies suggests that demand for workers is dwindling uncomfortably quickly amid the growing financial squeeze on firms and as greater automation reshapes the jobs market.
“While the US–Iran peace deal has halted hostilities, the damage to the UK’s labour market is already done, with hiring intentions — already weakened by soaring staffing costs — likely to fade further as higher energy bills bite, lifting unemployment towards 6 per cent.”
On the implications for today’s interest rate decision, Suren added:
“These figures seal the deal on a midday interest rate hold by reassuring rate setters that a softening labour market can help keep this Iran-driven inflation shock short lived by dampening demand across the economy.
“The Monetary Policy Committee’s vote split and minutes could tilt marginally more dovish, reflecting policymakers’ likely view that the US–Iran peace agreement could improve the likelihood of inflation slowing without additional policy action.” —ICAEW
