Bank of England warns UK youth unemployment rises in low-gear economy

Traders Union
All News
Economic Data
UK youth unemployment warning

Highlights

Bank of England deputy governor Clare Lombardelli reports UK employers are freezing new recruitment due to higher energy prices and economic uncertainty, impacting young jobseekers.
Youth unemployment in the UK rises to its highest level outside the Covid pandemic since 2015, as overall unemployment climbs to 4.7% in 2024.
Businesses in hospitality and retail, facing higher costs from factors like the Iran war and weak consumer demand, increasingly view hiring young people as a higher risk.

Hiring slowdown and rate outlook

As first reported by The Guardian, Bank of England deputy governor Clare Lombardelli says employers are holding back from hiring as higher energy prices and a more uncertain outlook weigh on business decisions. She describes the labour market as a "low-gear economy", with companies retaining existing staff while freezing new recruitment rather than cutting jobs outright.

Lombardelli says this low hire, low fire pattern is falling most heavily on people entering the workforce, because fewer vacancies mean fewer routes into employment for younger jobseekers. She adds that the Bank is preparing for a "live" decision on interest rates next month after raising borrowing costs last week for the first time in three years.

She says the impact is especially visible in hospitality and retail, sectors that often provide a first step into the labour market for young people. Employers surveyed by the Bank also indicate that hiring a young person is seen as carrying greater risk than in the past.

Pressure on the UK jobs market

The warning comes as the UK government awaits a report by former Labour cabinet minister Alan Milburn on young people and work, expected next week. The issue is gaining urgency after the number of young people not in education, employment or training nears 1 million.

UK unemployment rises this year to 4.7%, while youth unemployment climbs more sharply to its highest level outside the Covid pandemic since 2015. Businesses are also facing a combination of higher costs linked to the Iran war, higher taxes and weaker consumer demand during the cost of living crisis.

The Bank is closely tracking labour market conditions because persistent inflation could strengthen if workers retain enough bargaining power to secure higher pay and companies pass those costs on through prices. Lombardelli says, however, that higher unemployment does not automatically reduce inflationary pressure, because firms are still recruiting for harder-to-fill roles while holding on to staff they already need.

As highlighted earlier, a Reuters poll found most economists expected Bank Rate to rise to 4.0% in November.

This material may contain third-party opinions, none of the data and information on this webpage constitutes investment advice according to our Disclaimer. While we adhere to strict Editorial Integrity, this post may contain references to products from our partners.