14 August 2023

Unemployment rate expected to remain at 4%

14 August 2023

Experts are expecting the slow cooling of the jobs market to continue when the Office for National Statistics (ONS) releases new data on Tuesday morning.

The unemployment rate in the three months to the end of June is expected to remain unchanged at 4.0%, according to a consensus supplied by Pantheon Macroeconomics.

But within this there is room for a considerable slowdown in employment growth.

The three-month growth rate will be just 30,000 in June, compared with 102,000 in March, according to predictions from Pantheon’s Samuel Tombs and Gabriella Dickens.

They said recent data suggest that by the end of this year the unemployment rate could have ticked up to around 4.25%.

This is a level that the Bank of England’s Monetary Policy Committee (MPC), which sets interest rates, does not think will be reached until the second quarter of 2024.

“The timeliest labour market data continue to suggest that the Monetary Policy Committee is too optimistic in expecting unemployment not to reach 4.25% – its estimate of its equilibrium rate — until Q2 2024,” they said.

“Employment is likely merely to flatline in the second half of this year, suggesting that the unemployment rate will rise to 4.25% by the end of this year, from 4.0% in May, as the workforce continues to grow.”

It could mean the Bank eases off on its interest rate hikes. Rates have now hit 5.25%, after being just 0.1% in December 2021.

They added: “We continue to think the MPC will have seen sufficient signs of labour market weakness to stop their tightening cycle in November, having increased Bank rate by 25 basis points (to 5.5%) for one final time in September.”

It comes as separate data on Monday suggested that companies are trying to hold onto staff who have job offers elsewhere.

A survey of 2,000 employers by the Chartered Institute of Personnel and Development (CIPD) showed that two-fifths of them have told staff they would match the pay that rival companies had offered.

Half of the companies who said they would match or increase other offers said they have increased the level of counteroffers they have given over the last year.

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