London Daily

Focus on the big picture.
Wednesday, Jul 09, 2025

Sunak’s relief over rising UK employment may be short-lived

Sunak’s relief over rising UK employment may be short-lived

Analysis: chancellor warns of ‘bumps in the road’ as Covid, furlough and Bank verdict loom
Rishi Sunak is too savvy an operator to declare victory in the battle against unemployment because the past 18 months have shown that the unexpected can happen, and often does.

Yet while noting that there could still be “bumps in the road”, the chancellor is certainly relieved by how well the UK labour market has recovered from the effects of the Covid pandemic.

The latest jobs bulletin from the Office for National Statistics showed the employment rate up and the unemployment rate down. Job vacancies hit 1m for the first time in July and the number of hours worked a week – while still below their pre-crisis levels – passed 1bn for the first time since early 2020. Without question, this was an extremely strong report.

Three big imponderables remain. The first is whether the labour market will be knocked off course by the large number of daily cases of the Delta variant of the virus being reported in recent weeks. Thus far, the boost to employment from reopening the economy after its winter lockdown has outweighed any headwinds from the “pingdemic” or consumers becoming more nervous due to fears of falling ill.

The second issue looming is whether unemployment will start rising now the furlough scheme is being phased out. Wage subsidies have been – along with the development of vaccines – one of the two main success stories of the past 18 months and the TUC says it is premature to bring them to an end next month.

Sunak thinks the furlough scheme can be phased out relatively painlessly because half the people still on the scheme are on flexi-furlough, working some hours in their old jobs.

The ONS said there was no evidence of redundancies increasing before employers having to make a contribution to the costs of the furlough in July, which supports the chancellor’s view that firms are less likely to make people redundant if they are paying a share of their wages.

Even so, the continued problems of certain sectors and the structural changes to the economy since the start of 2020 – more working from home and an increase in online shopping, for example – mean some dislocation is inevitable.

Finally, there is the question of what the Bank of England does in response to a labour market in which there appears to be little spare capacity. In the three months to June, annual growth in average earnings reached 8.8%, up from 7.4% in the three months to May and the highest since the current series began 20 years ago.

On the face of it, there is a case for immediate action from Threadneedle Street to prevent a wage-price spiral.

Appearances can be deceptive, however. Most of the annual increase in earnings was due to weak wage growth during the spring of 2020 and the fact that job losses were concentrated in low-paid sectors such as hospitality. Underlying pay growth once these factors are stripped out is running at 2%, according to Ruth Gregory, a senior economist at Capital Economics. Threadneedle Street has no need to rush into a decision: it has time to see how things pan out in the next few months.
Newsletter

Related Articles

0:00
0:00
Close
BRICS Expands Membership with Indonesia and Ten New Partner Countries
Weinstein Victim’s Lawyer Says MeToo Movement Still Strong
U.S. Enacts Sweeping Tax and Spending Legislation Amid Trade Policy Shifts
Football Mourns as Diogo Jota and Brother André Silva Laid to Rest in Portugal
Labour Expected to Withdraw Support for Special Needs Funding Model
Leaked Audio Reveals Tory Aide Defending DEI Record
Elon Musk Founds a Party Following a Poll on X: "You Wanted It – You Got It!"
London Stock Exchange Faces Historic Low in Initial Public Offerings
A new online platform has emerged in the United Kingdom, specifically targeting Muslim men seeking virgin brides
Trump Celebrates Independence Day with B-2 Flyover and Signs Controversial Legislation
Boris Johnson Urges Conservatives to Ignore Farage
SNP Ordered to Update Single-Sex Space Guidance Within Days
Starmer Set to Reject Calls for Wealth Taxes
Stolen Century-Old Rolls-Royce Recovered After Hotel Theft
Macron Presses Starmer to Recognise Palestinian State
Labour Delayed Palestine Action Ban Over Riot Concerns
Swinney’s Tax Comments ‘Offensive to Scots’, Say Tories
High Street Retailers to Enforce Bans on Serial Shoplifters
Music Banned by Henry VIII to Be Performed After 500 Years
Steve Coogan Says Working Class Is Being ‘Ethnically Cleansed’
Home Office Admits Uncertainty Over Visa Overstayer Numbers
JD Vance Questions Mandelson Over Reform Party’s Rising Popularity
Macron to Receive Windsor Carriage Ride in Royal Gesture
Labour Accused of ‘Hammering’ Scots During First Year in Power
BBC Head of Music Stood Down Amid Bob Vylan Controversy
Corbyn Eyes Hard-Left Challenge to Starmer’s Leadership
London Tube Trains Suspended After Major Fire Erupts Nearby
Richard Kemp: I Felt Safer in Israel Under Attack Than in the UK
Cyclist Says Police Cited Human Rights Act for Riding No-Handed
China’s Central Bank Consults European Peers on Low-Rate Strategies
AI Raises Alarms Over Long-Term Job Security
Saudi Arabia Maintains Ties with Iran Despite Israel Conflict
Musk Battles to Protect Tesla Amid Trump Policy Threats
Air France-KLM Acquires Majority Stake in Scandinavian Airlines
UK Educators Sound Alarm on Declining Child Literacy
Shein Fined €40 Million in France Over Misleading Discounts
Brazil’s Lula Visits Kirchner During Argentina House Arrest
Trump Scores Legislative Win as House Passes Tax Reform Bill
Keir Starmer Faces Criticism After Rocky First Year in Power
DJI Launches Heavy-Duty Coaxial Quadcopter with 80 kg Lift Capacity
U.S. Senate Approves Major Legislation Dubbed the 'Big Beautiful Bill'
Largest Healthcare Fraud Takedown in U.S. History Announced by DOJ
Poland Implements Border Checks Amid Growing Migration Tensions
Political Dispute Escalates Between Trump and Musk
Emirates Airline Expands Market Share with New $20 Million Campaign
Amazon Reaches Milestone with Deployment of One Millionth Robot
US Senate Votes to Remove AI Regulation Moratorium from Domestic Policy Bill
Yulia Putintseva Calls for Spectator Ejection at Wimbledon Over Safety Concerns
Jury Deliberations in Diddy Trial Yield Partial Verdict in Serious Criminal Charges
House Oversight Committee Subpoenas Former Jill Biden Aide Amid Investigation into Alleged Concealment of President Biden's Cognitive Health
×