United Kingdom: Unemployment rate falls in May–July
According to the ONS, in May–July the unemployment rate registered 3.6%, down 0.2 percentage points from the previous rolling quarter and below its pre-pandemic level. That said, the drop was driven by higher inactivity, as the employment rate fell in the same three-month period. Moreover, the number of job vacancies fell at the fastest pace in two years in the three months to August.
The latest data suggests that demand for workers is cooling somewhat. That said, the labor market remains tight, in part due to a spike in inactivity so far this year, which could fuel wage growth ahead. The unemployment rate is forecast to rise above 4% heading into 2023 as the economy slows.
On the implications of the latest figures, ING’s James Smith said:
“The number of people classifying as not working due to long-term sickness is up by almost 400,000 since late 2019, and almost 150,000 in the last two months’ worth of data alone. It’s hard to escape the conclusion that this is linked to the pressures in the NHS (National Health Service). […] Persistent worker supply constraints coupled with so far only modest signs of reduced hiring demand will provide further ammunition for Bank of England hawks.”