Covid continues to weigh on UK labour market

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11th November 2022

Bite-sized business news from the UK and beyond

Good morning This week as crypto has tanked, the art market has thrived: The collection of Microsoft co-founder Paul Allen raised $1.5bn at Christie’s New York, making it the biggest sale in auction history (the proceeds will go to charity).

Today's stories

Covid continues to weigh on UK labour market
Markets surge after surprising US inflation drop

ECONOMY
Covid continues to weigh on UK labour market

What happened?
New data revealed that 500,000 British workers have dropped out of the job market due to poor health since the pandemic which has exacerbated staff shortages.

How did we get here?
Since the reopening of the economy post lockdown, unemployment has been near 50-year lows. But the workforce has shrunk with the number of working age people who now cite a long-term illness or mental health problems jumping 25% since 2019 to 2.5m, according to the Office of National Statistics.

This is causing labour shortages with industries such as healthcare, retail and hospitality struggling to fill vacancies. Yesterday the boss of high street retailer Next urged the government to let more foreign workers into the UK to ease the shortages.

The UK labour market is falling behind other countries
Separate data showed the UK is on track to become the only major developed country with employment below pre-pandemic levels at the start of 2023.

A combination of a rise in long-term sickness, more people taking early retirement and an exodus of EU citizens post-Brexit mean that the country is trailing behind most developed nations in its post-pandemic job market recovery.

In 2019 76.5% of those between 16 and 64 were in employment but currently is 75.5%. The one percentage point fall means the labour market’s post-pandemic recovery is weaker than in any country except Switzerland and Latvia.

Zooming out: The Bank of England has been raising interest rates this year to tame 40-year high inflation of 10%. A smaller labour force number could fuel wage growth and make it tougher to bring down inflation, forcing the central bank to raise rates more aggressively. A difficult situation when it warned last week that the UK is heading for the longest recession since records began.

Other stories to keep you in the loop

Civil servants vote to strike nationwide
Stronger profits at British Gas owner fuel £250m share buyback
Amazon is subjecting Alexa to a performance review
Made.com staff taking legal action over ‘appalling’ Zoom redundancies
Musk tells Twitter staff remote working will end
The high profile investors set to lose out from the FTX crypto implosion
WH Smith swings back to profit after travel market rebound

US
Markets surge after surprising US inflation drop

What happened?
Markets jumped yesterday after new data showed US inflation cooled in October. The news was cheered by investors as it gives hope that inflation in the world’s largest economy may have peaked.

How did we get here?
Much like the UK, the US has experienced 40-year high inflation in 2022 but there are signs that things are changing across the pond. Last month US consumer prices fell to 7.7% from 8.2% in September. It’s the lowest rate in eight months and below the 8.0% expected by investors.

The data paves the way for the US Federal Reserve to slow the pace of interest rate rises to 0.5% in December, after four consecutive 0.75% hikes with markets reacting positively:

The Fed’s more aggressive interest rate increases has helped the dollar strengthen against all major currencies this year. However the prospect of smaller rises led the pound to jump 2.8% yesterday to $1.17.
This year investors have been spooked by the risk of a global economic downturn while rising interest rates have made investing in the stock market less attractive. Yesterday UK, US and European stock market roses with tech and other interest rate-sensitive growth stocks doing especially well.

Zooming out: Evidence that the Fed’s aggressive rate hiking is having the desired effect of cooling inflation will come as welcome news for its central bank counterparts across the world.

Stat of the day

An estimated 1.5m international visitors are expected in Qatar for the World Cup later this month – half the country’s population

Interesting links from around the web

21 of Europe's most underrated places
The young workers flocking to 'career influencers'
Tempted to take it easy on Fridays? Use them to set yourself up for success instead

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Covid continues to weigh on UK labour market

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