UK jobs hit record high as Bank of England considers first post-pandemic interest rate hike
October 12, 2021, 6:28 am

UK jobs hit record high as Bank of England considers first post-pandemic interest rate hike

UK-London-Bank/Pixabay

The Reuters, British employers took their payrolls to a record high in September, shortly before the end of the government’s wage subsidies programme, potentially encouraging the Bank of England’s progress towards a first post-pandemic interest rate hike.

According to Reuters, data showed the biggest month-on-month increase in the number of employees on companies’ books, up by 207,000 from August, as employers turned to recruitment agencies to find staff and recovering accommodation and food firms created jobs.

Separate official data showed on Tuesday that the unemployment rate edged down to 4.5% in the three months to August from 4.6% in the May-July period, as expected by economists in a Reuters poll.

The BoE, which is gearing up to become the first major central bank to raise rates since the coronavirus crisis struck, is watching to see how many people became unemployed after the end of the furlough programme.

Around 1 million people are likely to have been on the scheme when it ended on Sept. 30, according to an estimate by the Resolution Foundation think tank.

Hussain Mehdi, macro and investment strategist at HSBC Asset Management, said the data left open the possibility of a BoE rate hike before the end of the year.

“The data show an ongoing improvement in the health of the UK labour market, although it’s too early to assess the impact of the end of the furlough scheme in September,” he said.

“However, the recent hawkish tone from Monetary Policy Committee members suggests inflation concerns are now firmly front of mind, lowering the bar for rate increases. A decent October jobs report could open the door to a hike as soon as the December meeting.”

The BoE is also monitoring pay growth as it tries to gauge how persistent a recent jump in inflation is likely to be.

Average weekly earnings were 7.2% higher than in the same three months of 2020, slowing from the previous reading of 8.3%.

Excluding bonuses, earnings rose by 6.0% in the June-August period, also losing some momentum.

The ONS estimated the underlying pace of wage growth, taking into account how job losses during the coronavirus lockdowns affected predominantly lower-paid workers, stood between 4.1% and 5.6% for regular pay in nominal terms.

That compared with regular pay growth of about 3% just before the pandemic hit.

Finance minister Rishi Sunak said the government was committed to helping people find work after the expiry of the furlough scheme.

Source: reuters

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Upon arriving to participate in the summit of the European Political Community, which includes around forty heads of state in Budapest, he said, "I look forward to sitting with the elected U.S. president and seeing how we will collectively ensure we meet challenges, including the threats from Russia and North Korea." He also noted that the strengthening of ties between Russia and North Korea poses a threat to the United States as well, according to reports from Agence France-Presse.

Before Trump's victory, Rutte expressed confidence that a united Washington would remain part of the defensive alliance, even if Trump became the 47th president of the United States. In an interview with German public broadcaster ZDF last Monday night, he stated that both Republicans and Democrats understand that NATO serves not only the security of Europe but also that of America. He added that both candidates are aware that the security of the United States is closely tied to NATO.

On Wednesday, NATO congratulated Trump on his victory but did not address the Ukrainian issue.

It is noteworthy that the relationship between the elected U.S. president and the defense alliance was not the best during his first term in the White House. Trump criticized NATO member states multiple times and even hinted at withdrawing from the alliance unless they increased their financial contributions.

Additionally, the issue of the Russian-Ukrainian war is one of the matters that complicate relations between the two sides, especially since Trump has repeatedly stated that he can end this ongoing conflict, which began in 2022, quickly. He implied that he had a peace plan between Kyiv and Moscow, while his vice president, JD Vance, revealed aspects of that plan, which stipulated Ukraine's commitment not to join NATO, thereby sending reassuring signals to the Russians.

Furthermore, many NATO member states in Europe fear that Trump might halt military aid to Ukraine after he previously criticized the U.S. for pouring funds into supporting Ukrainian President Volodymyr Zelensky.