In a stark warning to the UK labour market, Bank of England deputy governor Clare Lombardelli described the current economic climate as a “low‑gear economy,” a situation that is disproportionately hurting young job seekers. Lombardelli said that the ongoing conflict in the Middle East has driven up energy prices, creating uncertainty that has led employers to freeze new recruitment and retain existing staff.
According to Lombardelli, the result is a sharp rise in youth unemployment, now the highest level outside the COVID‑19 pandemic since 2015. She noted that while firms are not laying off workers, the lack of new hires means that those entering the labour market are being left behind.
“What you see is the cost falling on young people, so you can see this rapid rise in the number of young people who are struggling to find jobs,” Lombardelli told the Guardian. She added that the “low hire, low fire” dynamic is a direct consequence of the volatile geopolitical backdrop.
The Bank of England is also preparing for a “live” interest‑rate decision next month, following a recent increase in borrowing costs – the first change in three years. Lombardelli said the higher rates, combined with rising energy costs and a cost‑of‑living crisis, are squeezing consumer demand and further dampening hiring.
Government officials are closely watching the situation. The Labour Party’s Andy Burnham is awaiting the release of a report by former cabinet minister Alan Milburn, which will examine the state of work for young people. The report is expected next week and is likely to influence policy responses to the growing number of young people classified as NEET (not in education, employment or training).
Unemployment across the UK has climbed to 4.7% this year, while youth unemployment has surged at a faster rate. The Bank’s deputy governor highlighted that the combination of higher taxes, weaker consumer demand, and the energy‑price spike linked to the Iran war has created a challenging environment for employers.
Addressing the youth job crisis has become a priority for the government, which is looking for ways to support young people who are now facing limited employment prospects. The Bank of England’s analysis suggests that any easing of the economic pressures could help reverse the trend, but Lombardelli cautioned that the path to recovery will be gradual.
Source: The Guardian World
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