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(Bloomberg) — UK businesses stepped up job cutting in March, a sign that the Iran war is causing fresh turmoil in the labor market.
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The number of employees on payrolls dropped 11,000 after falling almost 6,000 the previous month, tax data published by the Office for National Statistics showed on Tuesday. It was worse than the flat reading expected by economists.
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The figures suggest the seven-week conflict is piling renewed pressure on the jobs market, which had been showing tentative signs of stabilization after being hit by sharp increases to payroll taxes and the minimum wage imposed by Prime Minister Keir Starmer’s Labour government. Vacancies fell to the lowest levels in almost five years.
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Labour Force Survey figures for the three months through February showed unemployment unexpectedly fell to 4.9%. However, economists now expect the jobless rate to increase as employers slam the brakes on hiring.
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The International Monetary Fund warned last week that Britain will be one of the hardest hit advanced economies from the conflict, which sent energy prices soaring, and predicted that unemployment will pick up to 5.6% this year.
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The Bank of England is expected to respond not by cutting rates to boost the economy, but raising them to stop higher inflation triggering a feedback loop on wages and prices. Figures on Wednesday are forecast to show inflation accelerated to 3.3% in March from 3% in February.
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The ONS also said private-sector wage growth slowed to 3.2% in the three months through February, in line with expectations and below the 3.25% the BOE deems compatible with its 2% inflation target.
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—With assistance from Mark Evans, Joel Rinneby and Harumi Ichikura.
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