Archive

July 23, 2025
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UK Structurally Unemployed

  • Higher employment taxes can entirely explain the fall in payrolls as the tax wedge hits its highest since 1987, raising our structural unemployment rate estimate by 0.48pp.
  • That could understate the structural shift amid a substantial drop in the threshold, rise in the minimum wage (jobs ban) and benefit rates. Some will go ‘inactive’ on disability.
  • The unemployment rate must rise more than its natural rate to deliver disinflationary pressure sustainably. Our structural estimates suggest it won’t break excess inflation.

By Philip Rush

July 17, 2025
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UK Jobs Data And The Muddled MPC

  • UK payroll revisions removed most of May’s weakness, while wage and price inflation is too fast, yet the BoE probably won’t back down from an August cut as the UR rises.
  • Fewer payroll inflows explain its downtrend, with <24yo suffering sustained pain, but the 25-64yo endure the taxation hit, structurally raising unemployment by ~0.5pp.
  • Wage growth isn’t showing signs of new disinflationary demand pressures, so we expect excessive underlying wage and price trends to persist, not helped by an August BoE cut.

By Philip Rush

July 14, 2025
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Tuning Tariff Impact Estimates

  • President Trump’s tariff policy seemingly follows a random walk with a drift towards deals. Path dependency raises risks and uncertainty around his volatile whims.
  • Corporate avoidance measures have spared their customers from most of the pain, but Vietnam’s deal as a template could belatedly bring more of the pain to bear.
  • We assume most countries stay at 10%. The impact of others rising to 20% may be smaller than the anti-avoidance hit, with the total now worth less than 0.4% to UK GDP.

By Philip Rush

July 10, 2025
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US Claims Continue To Cruise Calmly

  • Rising continuing claims in recent months have been heralded as a canary warning of belated suffering in the labour market. But the problem is ending before it ever began.
  • US employment growth is still aligned with its long-run average, and the unemployment rate is unchanged on the year. Openings and quits are also steady with averages.
  • The Fed needs excess disinflation to cut, and we believe this won’t materialise. That also avoids demand and policy pressure on the BoE and ECB, helping them hold rates.

By Philip Rush

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