Recent jobs figures indicate that Labour's increase in employers' national insurance contributions is leading to job losses, with unemployment rising to 4.5%. Employers are hesitant to hire, resulting in a decrease in vacancies back to pre-pandemic levels. Although average weekly earnings grew by 5.6%, this marks a decline from previous growth rates. The Bank of England anticipates that firms may absorb higher costs by reducing profits, but lack of data on company profitability makes predictions uncertain. Upcoming inflation data may provide further insights into the economic impact of these changes.
The unemployment rate climbed by 0.2 percentage points to 4.5% between January and Marchâthe highest level for nearly four years, as concerns about job losses due to rising NICs come true.
UK employers have begun to ease back on above-inflation pay growth, with average weekly earnings rising by only 5.6% in the first quarter of the year.
The Bank of England stated that it expects private-sector employers to share the burden of higher NICs by reducing profits, but concrete data on company profitability is lacking.
There is a growing suspicion that companies that exploited monopoly pricing power during the pandemic will again seek to charge consumers much higher prices for their goods.
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