# UK unemployment hits lowest since 1974 but jobs boom is fading Author: Pal Sinha, Barnali Author URL: https://financedigest.com/author/pal-sinha-barnali Published: 2022-09-13 Category: NEWS Category URL: https://financedigest.com/category/news Meta Title: Britain's Unemployment Rate Drops to 3.6% as Jobs Boom Fades Meta Description: Find out why the drop may not be all good news for the UK economy as signs of a slowdown emerge. Learn more from Reuters on the Bank of England's URL: https://financedigest.com/uk-unemployment-hits-lowest-since-1974-but-jobs-boom-is-fadinghtml ![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-09-13t072853z1lynxmpei8c0b4rtroptp4britain-truckers-1736815224841-compressed.jpg) By William Schomberg and David Milliken LONDON (Reuters) -Britain’s jobless rate hit its lowest since 1974 but the drop was due mostly to a fall in the size of the workforce and there were other signs that the country’s jobs boom is petering out, adding to the Bank of England’s inflation headache. The unemployment rate sank to 3.6% in the three months to July, the Office for National Statistics said. Economists [polled by Reuters](https://www.financedigest.com/bank-of-england-to-raise-rates-by-50bps-again-to-tame-inflation-reuters-poll.html "Bank of England to raise rates by 50bps again to tame inflation: Reuters Poll") had expected it to hold at 3.8%. However, the fall was not a sign of health in Britain’s economy which is at [risk of a recession](https://www.financedigest.com/high-inflation-recession-risk-widen-ecb-dilemma.html "High inflation, recession risk widen ECB dilemma"). The number of people in employment grew by 40,000, less than a third of the increase forecast in the [Reuters poll](https://www.financedigest.com/worst-not-over-for-em-currencies-as-u-s-dollar-thunders-on-reuters-poll.html "Worst not over for EM currencies as U.S. dollar thunders on: Reuters poll"). We’re now starting to [see signs](https://www.financedigest.com/adecco-sees-signs-of-a-hiring-slowdown-at-start-of-2023.html "Adecco sees signs of a hiring slowdown at start of 2023") of a labour market losing its momentum,” Jack Kennedy, UK economist at the global job site Indeed, said. The [economic inactivity rate](https://www.financedigest.com/sp-warns-of-possible-economic-blow-hit-to-japan-inc-from-boj-rate-hike.html "S&P warns of possible economic blow, hit to Japan Inc from BOJ rate hike") – measuring the share of the population who are not in work and not looking for work – increased by 0.4 percentage points on the quarter to 21.7%, its highest since the three months to January 2017. The ONS said the rise was driven by more people classified as long-term sick and by fewer full-time students [moving into employment than normal for the time of year](https://www.financedigest.com/30-years-of-excel-lence-time-to-move-on.html "30 YEARS OF EXCEL-LENCE: TIME TO MOVE ON?"). At the same time, pay growth rose by more than expected, reflecting a shortage of candidates for jobs, although it still lagged far behind inflation that is [expected to hit](https://www.financedigest.com/uks-dominos-expects-tech-investments-to-hit-2023-profit.html "UK’s Domino’s expects tech investments to hit 2023 profit") 10.2% in the 12 months to August when figures are published on Wednesday. The BoE is worried that tightness in the labour market will add to the recent [surge in price](https://www.financedigest.com/unicredit-sets-out-8-billion-aid-package-for-italy-clients-hit-by-surging-prices.html "UniCredit sets out billion aid package for Italy clients hit by surging prices") pressures. The [British central bank](https://www.financedigest.com/hsbc-acquires-british-arm-of-stricken-silicon-valley-bank.html "HSBC acquires British arm of stricken Silicon Valley Bank") raised interest rates the most since 1995 last month. It is [expected to increase them again on Sept](https://www.financedigest.com/uk-inflation-expectations-show-record-jump-in-sept-citi-yougov.html "UK inflation expectations show record jump in Sept -Citi/YouGov"). 22. Sterling jumped against the U.S. [dollar after Tuesday’s data](https://www.financedigest.com/dollar-skids-after-soft-u-s-economic-data-impact-of-opec-cuts-fades.html "Dollar skids after soft U.S. economic data; impact of OPEC+ cuts fades") and investors were pricing in an 83% chance of a three-quarters-of-a-percentage-point BoE rate hike next week, which would be its biggest since 1989, excluding an attempt to shore up the pound in 1992 which was quickly reversed. [PRICE PRESSURES](https://www.financedigest.com/heavy-norwegian-gas-maintenance-adds-to-energy-price-pressure.html "Heavy Norwegian gas maintenance adds to energy price pressure") There were other signs of [price pressures](https://www.financedigest.com/sony-hikes-ps5-price-on-economic-pressures-rising-rates.html "Sony hikes PS5 price on economic pressures, rising rates") in the labour market in the ONS figures published on Tuesday. Wages excluding bonuses rose by 5.2%, the highest rate since the three [months to August](https://www.financedigest.com/august-the-most-popular-month-to-start-a-holiday-home-search-reveals-portal.html "AUGUST THE MOST POPULAR MONTH TO START A HOLIDAY HOME SEARCH REVEALS PORTAL") 2021\. The Reuters poll had pointed to an [increase of 5.0%](https://www.financedigest.com/over-50-of-businesses-increased-their-cyber-security-budget-last-year-amid-attacks.html "Over 50% of businesses increased their cyber security budget last year amid attacks"). Including bonuses, wages rose by 5.5%. Britain’s labour market [defied expectations of a surge in unemployment during the coronavirus crisis](https://www.financedigest.com/british-shoppers-defy-cost-of-living-crisis-at-christmas.html "British shoppers defy cost-of-living crisis at Christmas"), helped by a 70 billion-pound ($82 billion) government jobs protection programme. But there have been signs [recently that the jobs boom is losing](https://www.financedigest.com/is-the-market-right-to-be-losing-its-head-with-the-recent-stock-market-collapse.html "Is the market right to be losing its head with the recent Stock market collapse?") some of its momentum. As well as the weaker-than-expected increase in employment, the number of [job vacancies in the June-to-August period fell by the most in two years](https://www.financedigest.com/inpost-sees-better-margin-in-poland-plans-no-job-cuts-this-year.html "InPost sees better margin in Poland, plans no job cuts this year"), down 34,000, although it remained historically high at 1.266 million. James Smith, an economist at ING, said soaring energy [prices might force companies to make bigger staff cuts](https://www.financedigest.com/tesla-cuts-u-s-model-s-and-model-x-prices-between-4-and-9.html "Tesla cuts U.S. Model S and Model X prices between 4% and 9%"). We would expect a more visible impact on the jobs market over the next few months, but the [government’s newly announced pledge to cap corporate energy](https://www.financedigest.com/european-governments-spend-half-a-trillion-euros-on-energy-crisis-report.html "European governments spend half a trillion euros on energy crisis – report") bills as well as households’ should help avoid a sharp rise in unemployment this winter,” Smith said. New Prime Minister Liz Truss announced last week a [cap on soaring energy prices](https://www.financedigest.com/eu-meets-to-try-to-break-gas-price-cap-impasse.html "EU meets to try to break gas price cap impasse"). ($1 = 0.8532 pounds) (Reporting by William Schomberg; Editing by David Milliken and Jacqueline Wong) --- This blog is powered by Superblog. Visit https://superblog.ai to know more. ---