Employment data “upset” supports the Bank of England to keep interest rates unchanged on Thursday

The Zhitong Finance App learned that British employers are laying off workers at the fastest rate in nine months, highlighting the weak trend in the UK job market, and the Bank of England will announce the latest interest rate decision on Thursday. Most economists expect the Bank of England to keep interest rates unchanged at 3.75% this Thursday. According to data released by the UK Office for National Statistics on Tuesday, the number of company employees fell by 26,000 in August, and the previous month's data was revised downward to a decrease of 19,000. This decline is greater than economists' forecast of 5,000 fewer people, but preliminary estimates are often revised.

Demand for labor remains sluggish, and the number of job vacancies dropped by 8,000 to 702,000, a five-year low. The unemployment rate stabilized at 4.9% for the three months up to July, but the UK Office for National Statistics warns that this estimate is still being affected due to quality issues with data collection.

After the data was released, the pound extended its decline, falling 0.2% to $1.3472.

These data show that the UK labor market continues to be sluggish for two years. Employers are facing greater uncertainty due to the US-Iran conflict and Prime Minister Andy Burnham's first budget due to be released on October 28.

The number of layoffs in British companies is getting worse. In the three months ending July, the layoff rate rose to 3.9 per 1,000 employees, the highest level since the beginning of the year and the first increase since the three months ending February.

Bank of England internal differences: weak employment vs. high oil prices

A weak labor market has reduced the possibility that a second round of inflation will infiltrate the UK economy, thereby easing the nervousness of most Bank of England interest rate makers. However, after oil prices rose above $109 per barrel on Monday, concerns about the outlook for inflation are growing. Traders have increased their bets on the Bank of England's interest rate hike, and it is expected that there will be as many as five rate hikes by the end of next year.

KPMG UK chief economist Yale Selfin said: “Today's data will reinforce the reason for dovish members of the Bank of England's monetary policy committee that the labor market remains a key source of deflationary pressure. High borrowing costs, weak demand, and ongoing geopolitical uncertainty may deter recruitment.”

Alleviating the UK youth unemployment crisis is the Labour government's top priority, but the crisis worsened further this summer. In the three months ending July, the unemployment rate for 16 to 24 year olds rose to 16.4%, the highest level since 2014, reversing a slight downward trend in the previous period.