Is the Burnham bounce about to fizzle out? This morning has seen the first shaky set of economic figures since his ascension to Mayor of Great Britain. Figures released by the Office for National Statistics (ONS) show 13,000 jobs disappearing in July, following a fall of 13,000 in June too. In total, just under 100,000 jobs have been lost in the last year and 188,000 have gone since the election.
Even more worrying in today’s release, though, is the headline unemployment figure of 4.9 per cent. Though flat, many economists had expected it to plunge. They predicted that because the figure is made up of an average of the previous three months and a large reading in March was due to drop out today, almost certainly sending the headline rate down. Instead, the most recent single-month rate surged to 5.4 per cent – its highest reading since October 2020.
Just under 100,000 jobs have been lost in the last year and 188,000 have gone since the election
The worst news on jobs, though, was in youth unemployment, which is sitting at around 15 per cent. Zoom in on 16- to 17-year-olds and just under a third are unemployed. There is little sign that anything the government has done to reverse this trend is having an effect. Nor is there any reason to believe it ever will. Training schemes and boosts to apprenticeships are always welcome, but they pale into insignificance when compared with the increased costs of hiring workers after the £25 billion raid on employers’ national insurance contributions and the hikes in the minimum wage. Quite simply: if hiring everyone gets more expensive and there’s no major discount to take on young workers, then why would you bother?
There was cause for concern in the wage data, also out this morning, too. The gap between our private and public sectors continued to widen, with private-sector wage growth slumping to 2.8 per cent while public workers saw their pay jump 6.1 per cent. ONS statisticians continue to insist that this is largely because of a ‘base effect’ caused by NHS pay rises happening earlier than usual, but it certainly confirms the view that only one part of our economy is growing: public spending.
The overall pay rise figure – 4.1 per cent – is the one to watch for the next few months, though. Why? Because it will prove whether the Bank of England’s Chief Economist Huw Pill is right or wrong. Strikingly, he’s gone against the Bank’s interest rate-setting committee’s decisions for a few meetings now, arguing that workers are likely to demand pay rises driven by the fear of resurgent inflation, which may end up perpetuating a wage-price spiral. If he’s right about that, then interest rates will surely have to be hiked this year. If he’s wrong, then the Bank can continue to remain on the sidelines and ride out the Hormuz-induced price rises that we’ll begin to see in the next inflation figures, due out tomorrow.
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