Things are going from bad to worse for the UK economy

Things are going from bad to worse for the UK economy. Jobs are continuing to be lost at a rapid pace, unemployment is rising, vacancies are falling and jobless benefit claims are up as businesses shed staff in response to the government’s heavily criticised business tax raid. The only sliver of solace is that the May payroll number was revised upwards, but we are still looking at unprecedented levels of job losses in the first half of the year, outside of the pandemic period.

This week’s data puts the Bank of England in an extremely tough spot. The bank's sole mandate is to maintain price stability, so one could argue that the June inflation data makes additional cuts less likely. Yet, should policymakers believe that the dire labour market performance heralds weaker inflationary pressures ahead, then an August rate reduction remains on the cards. An easing in wage growth will, at least, be a welcome development for policymakers, as this should help the bank in its quest to return inflation back to the 2% target.