Record Number of workers leave the labour market in Britain

Britain’s unemployment rate fell to its lowest since 1974 at 3.5% in the three months to August, but the drop was driven by a record jump in the number of people leaving the labour market.

The number of people classed as inactive – neither in work nor looking for it – rose by 252,000 from the three months to May, the biggest such increase since records began in 1971, the Office for National Statistics said.

The Bank of England (BoE), which is also trying to stem financial market turmoil triggered by new Prime Minister Liz Truss’s unfunded tax cuts and her pledges to end the economic “orthodoxy”, is worried that the shrinking labour market will fuel inflation pressures.

To this end, theBoE has raised interest rates from 0.1% last December to their current level of 2.25%.

Investors are betting heavily on a full percentage-point increase in its next policy announcement on Nov. 3 as it moves to offset the inflationary implications of the tax cuts announced by finance minister Kwasi Kwarteng last month.

The ONS said there had been a spike in employment and a fall in inactivity in the three months to May which might, at least in part, explain some of the big change in the three months to August.

The 0.6 percentage points increase in the inactivity rate to 21.7% in the period was the biggest on record alongside the increase between March and May 2020 when the coronavirus pandemic hit Europe, the ONS said.

Reuters/Hauwa Abu