Britain’s unemployment and workers’ wages embarrass the Bank of England
Despite the rise in the unemployment rate in Britain by a “slight form” last May, the results raised widespread concern among analysts, in light of the stressful economic conditions that exceed the labor market, especially with the average wages remaining stuck at their record level.
The unemployment rate rose over a period of 3 months to 4 percent at the end of May, compared to 3.8 percent in the three months ending in April, according to figures published Tuesday by the British Statistics Office. This is the first time that the unemployment rate has reached 4 percent since the beginning of 2022, which surprised analysts who had expected it to stabilize.
The rate has ranged between 3.7 and 3.9 percent in recent months, reaching historically low levels.
The British Statistics Office stated that the recent rise is mainly due to the increase in the number of unemployed people for more than a year. The number of job vacancies continued to decline for the 12th consecutive month between April and June.
On the other hand, average wages, excluding incentives, increased by 7.3 percent in the three months to May, unchanged compared to the previous three months, but the highest level of salaries since data began in 2001.
The continued rise in wages undermines the efforts of the Bank of England (British central bank) to curb high inflation, as the monetary policies of major central banks aim to reduce spending to push prices back. Thus, the Bank is now required to exercise more monetary tightening and raise interest rates at its next meeting, which would add additional burdens on the shoulders of the declining economy.
Simultaneously, the Monetary Fund said that the Bank of England (British central bank) may need to keep interest rates higher for a longer period, if inflation pressures persist.
In its review of the British economy, issued on Tuesday and seen by Asharq Al-Awsat, the Fund expected that Britain would face difficult economic conditions despite a previous expectation of avoiding recession. And the Fund warned that the UK’s long-term prosperity hinged on ambitious reforms, after the loss of the usual economic momentum from the British economy.
The IMF expects British growth to slow to 0.4 percent this year, driven by the increased tightening policies required to rein in inflation.
The report said that the recovery of the economy after the “Corona” pandemic witnessed obstacles through energy and employment crises and tightening, but the economy succeeded in avoiding recession during the current year.
On the other hand, Andrew Bailey, Governor of the Bank of England, said that the rate of inflation in Britain could decline “significantly” this year, with the full impact of interest rate increases appearing on the economy.
And “Bloomberg” stated that Bailey’s remarks, which came in the text of a speech he delivered at a conference at the Mansion House in London on Monday evening, indicate that monetary policy makers are increasingly wary of any new increase in interest rates, which have now reached their highest levels since the global financial crisis in 2008.
Britain’s inflation rate is now 8.7 percent, more than four times the central bank’s target rate of 2 percent, while core inflation, which strips out the most volatile food and energy prices, continues to rise according to the latest data.
Despite this, Bailey says he expects core inflation to decline automatically as headline inflation eases and the impact of higher interest rates continues to permeate the economy.
The Bank of England has raised key interest rates by about 5 basis points over the past 20 months, and the bank believes the effects of the rate hike are not yet fully felt.
Bailey added, “We expect the general inflation rate to decline significantly during the remainder of this year. This will happen mainly as a result of the decline in energy prices, and food prices will also decline with the decline in the prices of crops and raw materials, which led to a decline in commodity prices in stores.”
2023-07-11 16:03:24
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