Iran's war burns employment in the UK: layoffs increased by 100,000 in April, reaching a new high after the epidemic, and the unemployment rate soared to a ten-year peak.

British employers have made the largest number of job cuts since the early days of the pandemic, indicating that demand for labor is weakening as the Iran conflict drives up energy costs and weakens business confidence in the market. Data released by the UK Office for National Statistics on Tuesday showed that after a decrease of 28,000 taxpayers in March, there was a further significant drop of 100,000 in April. This number far exceeds the expected reduction of 10,000 economists, with the retail sector seeing the largest proportion of job cuts. However, the UK Office for National Statistics noted that as this data involves the start of the new fiscal year, some employers' submission of declaration information may be incomplete, and therefore subsequent revisions may be larger than usual. In the three months up to March, the UK unemployment rate rose from 4.9% in February to 5%; the monthly unemployment rate in March alone soared to 5.5%, the highest level since 2015. The number of job vacancies has dropped to the lowest level since 2021. These data show that the UK labor market has deteriorated significantly in recent months due to the impact of the energy shock caused by the Iran conflict. In the past three months, the cumulative number of job cuts in the country has exceeded 140,000. Following the release of employment data, traders have reduced their bets on a rate hike by the Bank of England. The current forecast for the cumulative rate increase by the Bank of England this year is 57 basis points to hedge against the inflation risks arising from the Iran situation. The pound exchange rate remains stable, fluctuating around 0.8683 against the euro. Economists Ana Andrade and Dan Hanson commented on this, saying, "The latest labor market data shows that the cooling demand for labor in the market has exceeded previous expectations due to the energy price hike and tightening financing environment triggered by the Iran situation. Although wage data may exaggerate the current weakness, the overall trend indicates that the labor market will further cool down in the future." This bleak employment data has once again shifted public focus to British Prime Minister Keir Starmer. Previously, employers generally attributed the wave of job cuts to the Labour government's policy of raising wage taxes and minimum wage standards last year. In early May, the Labour Party suffered a disastrous defeat in local elections, leading to a surge in dissatisfaction among party members and several resignations from the cabinet, plunging Starmer into a governance crisis. In the coming months, his position as prime minister may face challenges, with the highest voices seeking to succeed him, such as Andy Burnham, the mayor of Greater Manchester, who will run in a by-election to return to parliament and compete for the position of prime minister. Sanjay Raja, Chief UK economist at Deutsche Bank, stated, "The weakening trend in the UK labor market in the coming months is difficult to reverse, as geopolitical turmoil combined with domestic political chaos will further exacerbate the downward pressure on the economy." UK Employment and Pensions Minister Pat McFadden also admitted that the conflicts in the Middle East have cast a heavy shadow over the domestic job market. Affected by another round of energy shocks triggered by the Middle East conflict, economists have revised down their growth expectations for 2026. Despite achieving a strong growth of 0.6% in the first quarter of the UK economy, forecasters estimate that economic growth for the rest of the year will fall to a more moderate level. The employment report on Tuesday also showed that youth unemployment has risen to 16.2%, the highest level since early 2015, and has become a key concern for senior officials in the UK government; wage growth continues to slow down, with the regular wage growth rate in the UK for the three months up to March falling to 3.4%, the lowest since 2020, with wage growth in the private sector falling from 3.2% to 3%; real wage growth in the UK from January to March 2026 only increased by 0.3%, the slowest growth since 2023; in the three months up to April, the number of job vacancies in the UK decreased by 28,000 to 705,000, reaching a five-year low. Impact on central bank policy The weak job market has significantly weakened the need for the Bank of England to raise interest rates due to the Middle East situation, as the sluggish labor market environment makes it difficult for workers to offset the pressure of rising inflation through wage increases. James Smith, economist at ING, said, "Various data indicate that there is insufficient basis for the Bank of England to raise interest rates. Compared to four years ago during the last oil and gas crisis, the UK economy's sensitivity to the 'second round' effects of rising energy prices on wage growth has greatly reduced." With soaring energy costs keeping inflation high and wage growth slowing down, it means that households may feel greater economic pressure in the coming months. The market expects the data to be released on Wednesday to show an inflation rate dropping to 3%, but experts predict that inflation will rise again as household gas and electricity bills are expected to increase later in the year.