UK’s weak private sector labour market challenges BoE hawks

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Employment growth is already reliant on the public sector and Labour’s Budget is likely to add to the pressures

Bank of England forecasts suggest it can control inflation with interest rates falling to a level between 3.5 per cent and 3.75 per cent by the end of next year. This would count as the “gradual” pace promised by the bank’s governor Andrew Bailey. Our own forecast is on the dovish side of those outcomes with a rate of 3.5 per cent expected by the end of next year.

It is also worth noting the structural trends in UK employment show sectors reliant on public spending have done much of the heavy lifting in employment growth over the past few years. More than 600,000 jobs have been added in health and social work since December 2019, according to the ONS’s PAYE jobs data. In the past year alone, private sector jobs were down by 153,000, compared with 220,000 jobs created in areas dominated by public sector employers.

 

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