CNBC International Live interviews UK economist Sanjay Raja about a weak UK labour market. He says the labour market is "weak weak weak," with unemployment around 5%, youth unemployment above 16%, vacancies down 30–40% from peak, and rising slack. He argues the weakness reflects a mix of domestic policy shocks, global trade shocks, political uncertainty, and firms choosing automation/AI over hiring.
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The core thesis is straightforward: the UK labour market is deteriorating meaningfully, and the weakness is broad-based rather than a one-off data blip. Sanjay Raja repeatedly emphasizes that the market is "weak weak weak" and says the unemployment rate is about 5%, youth unemployment is above 16%, vacancies are down 30–40% from their peak, and the share of marginally attached workers has risen to a cyclical high. His expectation is that unemployment moves higher, toward roughly 5.5%, with some upside risk beyond that. He argues the UK is especially vulnerable because it has absorbed multiple shocks at once. On the domestic side, he points to successive national minimum wage increases and a rise in national insurance contributions as labor-cost pressures that are pricing some workers out, especially in hospitality, leisure, and retail. …
Tactically, the UK labour market looks fragile and still biased toward worse job data before it gets better. Near-term risk is that weak employment prints and rising inflation keep the BoE boxed in.
Over the next few months, the base case is a softer jobs market with unemployment drifting higher unless demand improves meaningfully. Confirmation would come from sustained falls in vacancies and weaker hiring; the main invalidation would be a clear rebound in business demand and labor absorption.
Structurally, the interview points to a UK economy where higher labour costs, AI, and automation could suppress traditional hiring even if GDP holds up. The lasting question is whether policy and training can adapt fast enough to prevent a persistent youth-employment problem.
The UK labour market is broadly weak, with unemployment around 5%, vacancies down sharply, and slack rising.
He cites multiple indicators rather than one headline number.
UK unemployment is expected to rise toward about 5.5%, with some upside risk beyond that.
He gives an explicit forecast and notes the risk is skewed higher.
The UK is particularly vulnerable because it has faced multiple shocks and higher labour costs.
He attributes weakness to successive policy and global shocks.
Why is the UK particularly vulnerable to having one of the sharpest unemployment increases amongst the G7 countries?
Sanjay says multiple shocks have hit the UK: successive big increases in the national minimum wage raising labor costs, an increase in national insurance contributions from last year pricing out workers in hospitality/leisure/retail, and two big trade shocks creating uncertainty. Firms are investing in capital, digitalization, and AI instead of hiring labor.
Would you say the UK is facing a two-tier labor market with a particularly difficult picture for young people?
Sanjay calls it one of the biggest crises of the generation. Youth unemployment is above 16%, the highest since 2015, driven by health issues and mental health prevalence. He notes it's a global phenomenon, not just the UK, and says AI will exacerbate these effects. He references the Milbourne report on building a 'working state' versus an unsustainable welfare state.
How much is AI already taking jobs — youth jobs, graduate jobs, or in the workforce generally — and do you expect it will displace tasks or create new roles?
Sanjay says the AI impact is hard to disentangle from digitization and automation. Knowledge-intensive business services (legal, professional services, consultancy, financial services) are seeing some effects, but it hasn't fully seeped into the labor market yet. He believes AI will create more jobs overall but stresses the need for education and policy to gear young people toward next-generation jobs.
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