UBS Joins Calls for More BOE QE as Covid Hit to Jobs Intensifies

UBS Group AG became the latest institution to predict more Bank of England stimulus next week amid growing signs of weakness in the U.K. jobs market.

Policy makers will raise their asset purchase target by 100 billion pounds ($130 billion), strategists at the Swiss bank predict, joining Royal Bank of Canada and Nomura International. The BOE’s Nov. 5 decision comes just after the end of the U.K.’s current furlough program on Saturday.

A report by the the Resolution Foundation Wednesday highlights the challenge facing authorities as they try to fight a resurgence of coronavirus with localized restrictions, while at the same time preventing a new spike in unemployment.

UBS Joins Calls for More BOE QE as Covid Hit to Jobs Intensifies

“The true nature of Britain’s jobs crisis is starting to reveal itself,” said Kathleen Henehan, a researcher at Resolution. “Worryingly, fewer than half of those who have lost their jobs during the pandemic have been able to find work since.”

About a fifth of young people who were furloughed have now lost their jobs, according to a survey by YouGov for Resolution. A similar percentage of Black, Asian and minority ethnic workers have also been cut. Only a third of the young who were let go have been able to find new work, the think tank said Wednesday.

On the fiscal side, Chancellor Rishi Sunak is introducing new support measures that are less generous than those offered the spring, and joblessness is already rising.

Kirstie Donnelly, head of training provider City and Guilds, is asking the government for 60 million pounds to fund programs to help workers change fields.

The idea is to “really get at the heart of helping people understand what
skills they’ve got, what transferable skills they’ve got and how they can
transfer those from one industry to another,” she told Bloomberg Daybreak Europe radio.

Of all the workers furloughed, about half have returned to their jobs full time, while a third remain partially furloughed and a 10th are out of work altogether, Resolution reported. The findings indicate that the jobless rate reached 7% in September, and as much as 20% among 18-24 year olds, meaning Britain is facing the highest youth unemployment in four decades.

Self-employed workers have also been hit hard, with more than half now earning less than before the crisis, and government support has been “poorly targeted,” Resolution said. One in six self-employed who claimed government aid experienced no loss of income, while half a million who are out of work received no help.

A separate report showed that employers nevertheless become more confident about hiring in the third quarter. A survey by the Recruitment and Employment Confederation showed them more optimistic than in the previous period, but still markedly gloomier than at the start of the year before the virus struck.

UBS Joins Calls for More BOE QE as Covid Hit to Jobs Intensifies

“The big test now is ensuring this jobs recovery can continue as businesses have to keep working online in the face of a renewed rise in coronavirus cases,” said Neil Carberry, chief executive of the REC.

BOE Governor Andrew Bailey and his colleagues say they stand ready to do more to help the economy if needed. In addition to more bond purchases the bank is exploring whether negative interest rates might help spur demand. HSBC Holdings Plc said yesterday the risk of such a move next year is underpriced in the market.

Across the channel, the chances of more easing from the European Central Bank are increasing for its policy decision tomorrow. Germany, the euro region’s largest economy, may close bars and restaurants for a month to get the virus under control.

©2020 Bloomberg L.P.

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