Interest rates expected to stay the same as unemployment rises
Official figures have shown the unemployment rate rose to 4.2% between June and August, which is up 4% from the March-to-May quarter.
On Tuesday the Office of National Statistics (ONS), released new research that has led experts to believe the Bank of England will hold interest rates at 5.25%.
Between June and August 2023 the number of people in work fell by 82,000, which equates to 0.3%, pushing the unemployment rate down to 75.7%.
Following this, the data provider S&P said its latest figures showed businesses were cutting back in response to concerns that consumers were likely to come under increasing pressure from the rising cost-of-living and high interest rates. An example of this is clothes stores majorly suffered in September, as high temperatures stopped people from buying autumn clothes.
Although the Bank of England have increased interest rates 14 times, when inflation dropped to 6.7% in August, they made the decision to hold rates at 5.25%. In addition, inflation remained the same in September which has led people to believe interest rates will stay the same, however, all will be confirmed on 2nd November when the Bank of England announce their decision.
Against this backdrop, analysts said the weakness of the jobs market was likely to convince the central bank’s monetary policy committee (MPC) that rates should remain paused, bringing some relief to mortgage payers.
Experts have referenced the decline in Tuesday’s ONS figures in the number of job vacancies listed by employers, which dipped in August below one million for the first time in two years.
Ashley Webb, UK economist at forecaster Capital Economics, said: ‘The Bank will probably continue to believe that interest rates are gradually doing their job, and, in our view, it is unlikely to raise interest rates again.’
Commenting on the data, Sarah Coles, head of personal finance at investment firm Hargreaves Lansdown, claimed: ‘This isn’t the agony of a collapsing jobs market: it’s the chronic malaise of an economy growing gradually weaker.
‘With employment falling slightly, unemployment rising, economic inactivity up and vacancies dropping again, optimism is ebbing slowly away.’
Ms Coles has warned that the UK need to prepare for ‘more difficult times ahead.’
Image: KaiPilger