This week delivers a crucial double-bill of economic data that will test the Labour government and set the stage for a pivotal Bank of England decision. Fresh unemployment figures, due today, Tuesday 16 December 2025, will provide a stark snapshot of the jobs market, while Wednesday's inflation report is expected to show price growth remains stubbornly high.
Jobs Market Under Scrutiny as Unemployment Forecast to Rise
The latest unemployment data represents a significant moment for the government, which has faced criticism over the health of the employment sector. Ministers have denied that their policies have negatively impacted the ailing jobs market. However, a forecast from Big Four accounting giant EY predicts the UK's unemployment rate will surge to five per cent early next year, with only a slight fallback in later months.
Business sentiment appears to support a challenging outlook. In various surveys, employers have pointed to Chancellor's £25bn hike to national insurance contributions (NICs) as a key factor cooling hiring intentions. Many firms stated the increased payroll tax has forced them to cut costs by making staff redundant.
Inflation Sticky Ahead of BoE's Close Rate Call
All eyes will then turn to Wednesday's inflation release, the last major data point before the Bank of England's Monetary Policy Committee meets on Thursday. According to a consensus established by Trading Economics, price growth is set to remain at 3.5 per cent in the year to November. This would mark only a slight fall from the previous month, keeping inflation well above the Bank's two per cent target.
This persistent inflation will pile greater scrutiny onto Threadneedle Street's upcoming interest rates decision. Governor Andrew Bailey had previously stated he would wait for more economic data before judging whether to cut rates, heightening the significance of Wednesday's numbers. Despite the sticky inflation forecast, money markets suggest traders are still pricing in a 25 basis point cut, with Bailey expected to make the final call after a close debate between doves and hawks on the committee.
Economic Headlines Set the Scene
The backdrop to this week's data releases includes several concerning economic signals from recent reports:
- Business confidence has been knocked to a two-year low amid deteriorating conditions following the Budget.
- High earners have seen their purchasing power eroded by recent fiscal measures.
- FTSE 100 pharmaceutical firm Hikma replaced its boss after share price woes.
- Motor finance lenders are bracing for a wave of legal battles amid a redress spat.
The confluence of weak employment signals and persistent inflation presents a complex challenge for policymakers, balancing the need to support the labour market against the ongoing battle to control living costs.
