The UK labor market showed signs of tightening, with the employment rate rising to 74.9% and unemployment at 4.4%, which was lower than anticipated. Despite a wage growth of 5.9%, concerns linger about potential job cuts due to rising living wages and increased national insurance contributions for employers. The supermarket sector is already experiencing job losses, and more layoffs are likely as businesses brace for changes in costs. A sharp increase in unemployment could negatively affect economic growth and government revenue, leading to tighter fiscal conditions ahead.
The UK Labour market tightened more than expected over the Christmas period, with unemployment lower than feared and wages rising.
Rising living wages and increased employer national insurance contributions mean many large employers may look to cut wage bills ahead of April.
While a sudden flurry of job losses could reduce inflation, the danger is that it leads to a spike in unemployment impacting growth.
The government will be watching the next few months' numbers through their fingers.
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