UK jobless rate hits 48-year low as people quit labour market

Britain’s unemployment rate fell to its lowest since 1974 at 3.6% in the three months to July as more people left the labour market, according to official data on Tuesday that could add to the inflation headache for the Bank of England.
Economs polled Reuters had expected the jobless rate to stay at 3.8%.
The Office for National Statics said the number of people in employment grew 40,000 in the May-July period, less than a third of the increase expected the economs polled Reuters.
The economic inactivity rate – measuring the share of the population who are not in work and not looking for work – increased 0.4 percentage points on the quarter to 21.7%, its highest since the three months to January 2017.
The ONS said the change was driven an increase in people classified as long-term sick as well as students leaving the jobs market.
The BoE is worried about increasing inactivity in the labour market as it could help to fuel inflation pressures due to a lack of candidates to fill jobs.
The BoE raised borrowing costs the most since 1995 last month and said it remained ready to act forcefully if that pressure became more persent. It is expected to raise interest rates again on Sept. 22.
Sterling rose against the U.S. dollar after Tuesday’s data.
Figures due to be published on Wednesday are expected to show Britain’s consumer prices index rose 10.2% in the 12 months to August, according to the economs polled Reuters.
There were other signs of price pressures in the labour market in the ONS figures published on Tuesday.
Wages excluding bonuses rose 5.2%, picking up pace from the three months to June to their highest rate since the three months to August 2021. The Reuters poll had pointed to an increase of 5.0%.
Including bonuses, wages rose 5.5%, a bit stronger than the poll forecast of 5.4%.
There were also signs that the labour market is losing some of its momentum.
The number of job vacancies in the June-to-August period fell the most in two years, down 34,000, although it remained horically high at 1.266 million.