The pressure for an interest rate cut is mounting after new data revealed rising unemployment and slowing wage growth. The Bank of England now faces a tough decision at its August meeting.
Official figures show the UK jobless rate rose to 4.7% in May. This marks the highest level since June 2021. Analysts had expected unemployment to stay at 4.6%.
Meanwhile, wage growth slowed from 5.3% to 5%. The decline matches City forecasts but adds to concerns over weakening household incomes. Employers advertised just 727,000 vacancies in June. This extends a 36-month downward trend. Fewer job openings suggest businesses remain cautious amid economic uncertainty.
The figures compound worries about the UK’s economic health. GDP shrank 0.1% in May after a 0.3% drop in April. Despite inflation edging up to 3.6% in June, the pressure for an interest rate cut is building. Policymakers must weigh rising joblessness against stubborn price growth.
Most economists predict two rate reductions this year. Many believe the first could come as soon as August 7th.
The data also creates problems for Rachel Reeves. The chancellor faces scrutiny over Labour’s economic management ahead of an autumn budget expected to include tax rises.
Falling demand for workers and cheaper imports may soon curb inflation. However, this offers little comfort to households struggling with stagnant wages.
A KPMG report found permanent job placements fell at the fastest pace in 22 months. At the same time, candidate numbers grew at the sharpest rate since November 2020. This suggests a wave of layoffs is pushing more people into an increasingly competitive jobs market.
With the pressure for an interest rate cut now undeniable, all eyes turn to Threadneedle Street. The Bank’s next move could define Britain’s economic trajectory for months to come.
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