Energy shockwave hits the UK! Labor market shows fatigue, with the number of layoffs in March reaching a near-year high.

Notice that British companies increased layoffs in March, indicating that the Iran war is causing new cautious sentiments in the labor market, following warnings that the UK would become one of the most affected developed economies by energy shocks. Tax data released by the UK Office for National Statistics on Tuesday showed a reduction of 11,000 employees on payrolls, the largest drop since November last year and double the decrease in February. This result fell short of economists' previous expectations of stability. These data indicate that the seven-week conflict is putting new pressure on the job market. Previously, there had been initial signs of stability in the labor market following a significant increase in wage taxes and minimum wage by the Labour government led by Prime Minister Keir Starmer. Currently, job vacancies have fallen to the lowest level in nearly five years. At the outbreak of the Iran war, British employers began laying off employees. Ashley Webb, Senior Economist at Capital Economics UK, stated that these data are "initial signs that rising energy prices due to the Iran war are dragging down business recruitment plans." Despite the unemployment rate unexpectedly falling to 4.9% in the three-month labor force survey data up to February, this was mainly driven by an increase in economically inactive population (including students). This may be because unemployed Britons who cannot find work are re-entering the job market, remaining in a wait-and-see mode. The market largely had a muted response to Tuesday's data. The pound exchange rate remained stable, and bets on the Bank of England raising interest rates at least once this year to curb inflation threats remained largely stable. Economists currently predict that as businesses slam the brakes on hiring, the unemployment rate will rise. The International Monetary Fund (IMF) warned last week that the UK would be one of the developed economies most affected by this conflict, with soaring energy prices, forecasting that the UK's unemployment rate will rise to 5.6% this year. UK Employment and Pensions Minister Pat McFadden stated, "These data indicate an improvement in the labor market at the beginning of the year. But we cannot escape the impact of the Middle East war, which may transmit to prices and employment in the coming months." Workers' withdrawal from the labor market led to a decrease in the unemployment rate. Investors expect that the Bank of England's response will not be to stimulate the economy by cutting interest rates, but rather to stop a high inflation-triggered wage-price feedback loop by raising rates. Data to be released on Wednesday is expected to show that the inflation rate in March has accelerated from 3% in February to 3.3%. The Office for National Statistics also stated that wage growth in the private sector slowed to 3.2% in the three months ending in February, in line with expectations and below the Bank of England's target of 3.25% in line with their 2% inflation target. Economists Dan Hanson and Matt Bunny stated, "With a significant change in inflation prospects due to the war, the key issue facing the Bank of England is whether a one-time rise in prices will wage demands and increase the sustainability of inflation. The weak wage data in February, along with the prospect of further softening in the job market, support our basic assumption that this mechanism is unlikely to form as it did in 2022."