London, United Kingdom. Britain’s employers slowed hiring and posted fewer job vacancies in April, according to data released this week that pointed to the impact of the Iran war on the economy. The figures prompted investors to reduce bets on Bank of England interest rate increases.
Payrolls fall
Early payroll data from the tax office, which are often revised sharply around the start of the tax year in April, showed a drop of 100,000 in the month from March. Estimates for the previous four months were also lowered.
The Office for National Statistics said the April decline in payrolls was the biggest since May 2020, at the start of the COVID-19 pandemic, although it said the figures were likely to be revised.
Unemployment edges higher
The unemployment rate rose to 5% in the first quarter, from 4.9% in the three months to February. The figure is a prominent measure of the economy, although it is based on a survey that is being overhauled.
The rise could add to the challenges facing Prime Minister Keir Starmer.
Reaction from officials and economists
Work and pensions minister Pat McFadden pointed to an increase in the number of people in work from a year earlier, but said: “We know the conflict in the Middle East is casting a shadow on the labour market.”
James Smith, an economist at ING, said the payroll figures, along with slower wage growth, made his forecast that the Bank of England would raise rates in June look close.
“All of this questions the need for Bank of England rate hikes,” Smith said, adding that the economy appeared less vulnerable to demands for higher wages or companies pushing up prices than after Russia’s full-scale invasion of Ukraine, which also caused an energy price shock.
Allan Monks, an economist at JP Morgan, said further signs of weakness in the jobs market would likely reduce the Bank of England’s appetite for a quick rate rise.
Market expectations
Investors reduced their bets on Bank of England rate hikes over the rest of 2026, with about two quarter-point increases priced in. On Monday, the market had priced in roughly even odds of a third increase.
Inflation data due on Wednesday will be important in assessing whether persistent price pressures are easing.
Will Wednesday’s inflation data change expectations for Bank of England policy?
