Labour market pressures showing early signs of settling

Commenting on this morning’s release of labour market statistics, that showed the rate of unemployment increasing by 0.2% in the three months to November, vacancies falling for the sixth consecutive month and a slight decrease in the inactivity rate, Kitty Ussher, Chief Economist at the Institute of Directors, said:

“The labour market remains extremely tight and our members continue to report serious difficulties in finding the skills they need. However, this morning’s data suggests that, from a business point of view, some of the pressures we have seen over the last year may be beginning to settle. In particular, it is encouraging that the inactivity rate has fallen slightly in the last three months with more students and over-50s looking for work.

“The governor of the Bank of England yesterday warned that the tightness of the labour market was adding to inflationary pressure. Today’s data suggests that the mechanism he is referring to is already easing, suggesting it may be time to pause and let recent interest rate increases work their way through the economy rather than continuing to raise them.”