Recession fears as Britain losing jobs at fastest pace since pandemic

Unemployment rate of 4.2% highest in almost two years and up from as little as 3.5% a year ago when companies were hiring rapidly after the end of the covid lockdowns

Some economists are now concerned the rise in unemployment threatens to tip an already stagnant economy into recession.

The British economy lost jobs again in the three months to the end of August, marking the longest drop in employment since the depths of the coronavirus pandemic and a sign inflationary pressures may be abating.

Employment fell 82,000 in June to August after a 133,000 drop in the period from May through July, Britain's Office for National Statistics said. It was third consecutive three-month period in which employment had fallen compared to the previous three months, the worst stretch since early 2021.

The ONS changed the way it calculates the figures after delaying its unemployment and employment figures “to produce the best possible estimates”. 

“The broad picture remains one of a cooling labor market," analysts at Bloomberg Economics said. 

Recession concerns

Some economists are now concerned the rise in unemployment threatens to tip an already stagnant economy into recession. A separate report from S&P Global showed British businesses are more pessimistic than at any point this year, prompting hiring freezes and staff cuts.

Soaring living costs, higher interest rates and falling exports meant the economy “continued to skirt with recession in October”, said Chris Williamson, chief business economist at S&P Global Market Intelligence.  “A recession, albeit only mild at present, cannot be ruled out.” 

Unemployment held at 4.2% under the new calculation, lower than the 4.3% figure the ONS previously released. That is the highest in almost two years and up from as little as 3.5% a year ago when companies were hiring rapidly after the end of the covid lockdowns.

“We see enough corroborating evidence to think the official labour market statistics are correctly signalling greater slack,” said Gabriella Dickens, an economist at Pantheon Macroeconomics. 

• Bloomberg