The UK’s hiring slowdown has raised concerns about a potential economic downturn, according to a leading economist. Simon French, chief economist at City stockbroker Panmure Liberum, has warned that the country is on “recession watch” following a drop in job vacancies.
The latest official figures revealed that the unemployment rate has hit 4.7%, up from 4.1% last August, triggering an economic alarm bell known as the Sahm rule. This predicts that a recession is imminent when the unemployment rate rises by at least 0.5 percentage points within a year.
Mr French said the breach of the rule is “a clear warning signal for UK policymakers”. He added: “This rule has been breached four times in the last two decades and on each occasion this coincided with a technical UK recession.”
The Sahm Rule, created by American economist Claudia Sahm, is typically used by the Federal Reserve to determine if the US economy is in the earlier stages of a recession. According to the latest figures from the Office for National Statistics (ONS), the estimated number of vacancies in the UK fell by 10,000 on the quarter to 728,000 in the three months to August.
Mr French said both fiscal and monetary policymakers in Britain are aware that statistics show “a softening UK labour market and the heightened risk of damaging pass-through to the economic cycle”.
His comments come as official figures released today showed that the rate of inflation was stuck at a 19-month high of 3.8% in August. The consumer prices index (CPI) rose by 3.8% last month, according to the ONS, staying at the highest level since January 2024.
Economists warned that the figures “confirm inflation remains entrenched,” while the data is “troubling” and cements market expectations that policymakers will not be able to cut interest rates again this year. Rises in food and drink prices accelerated for the fifth month in a row to 5.1% in August, driven by items like vegetables, milk, eggs, cheese and fish.
