UK economy resists support for end of jobs, allaying BoE concerns

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LONDON – The UK labor market has resisted the end of the government’s holiday program last month, according to data that could allay lingering concerns from the Bank of England over the risks of raising interest rates relative to their pandemic trough.

The pound strengthened as the number of employees on corporate payrolls in October rose 0.8% above February 2020 levels, before the coronavirus pandemic hit, and rose of 160,000 over the month.

The Bank of England is closely monitoring whether unemployment rises after the job protection leave scheme expires at the end of September.

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“Now that today’s labor market data shows the hurdle has been lifted, we believe the Bank of England has the green light for interest rates to take off at its December meeting.” said Ambrose Crofton, global markets strategist at JP Morgan Asset Management, said.

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

But Andrew Goodwin of Oxford Economics, a consultancy firm, said the BoE may need more time to assess the strains many consumers face due to inflation expected to hit nearly 5% in April. , when workers will also have to pay more taxes.

“Given the cost-of-living challenges households face and a full assessment of the end of the leave arguably requiring several months of data, we narrowly believe that the MPC will delay the rate take-off until February, “Goodwin said.

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The Office for National Statistics said it was possible for people made redundant at the end of the leave scheme to continue to appear as working in the data for a few more months, while they were working on their notice period.

“However, responses to our survey of businesses suggest that the numbers laid off were likely a small portion of those still on leave at the end of September 2021,” the ONS said.

DECLINING UNEMPLOYMENT RATES

Official data released by the ONS on Tuesday showed the unemployment rate fell more than expected to 4.3% for the three months to September, from 4.5% previously, its lowest in the three months to September. ‘in July 2020.

Employment increased by 247,000 in the July-September period, more than an increase predicted by 185,000 in the Reuters poll, while the number of unemployed fell by 152,000.

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

Excluding premiums, revenues were 4.9% higher than a year earlier, the smallest increase since the three months to March.

The ONS has estimated that the underlying pace of wage growth – taking into account workers returning to full pay after their leave and how job losses during coronavirus lockdowns hit them the most. lowest paid workers – ranged between 3.4% and 4.9% for non-bonus wages.

BoE Governor Andrew Bailey said Tuesday’s employment data and another release due in four weeks will be critical for the central bank’s thinking on whether to raise the bank rate for the first time since the start of the pandemic.

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“The anecdotes suggest the transition out of the leave scheme hasn’t increased unemployment, but we don’t really know the full story,” Bailey told lawmakers Monday. But he added that he believed the job market was “considerably tighter”.

Data on Tuesday showed vacancies hit a record high of 1.172 million in the three months to October, nearly 400,000 more than before the pandemic, although the pace of growth has slowed again.

The Resolution Foundation, a think tank, said it only takes an average of one and a half months for an employer to fill a vacant position, which is record time seen before the pandemic.

“This shows that the record vacancies are due to the reopening of the economy, rather than the inability to hire staff as some have suggested,” he said.

Employers in certain industries such as food processing and road transport say post-Brexit restrictions on European Union workers make it harder for them to fill jobs. (Reporting by William Schomberg and David Milliken; Editing by Andrew Heavens and Nick Macfie)