Unemployment rates rising in many large advanced economies: Fitch

Unemployment remains low by historical standards, but easing labour market conditions are starting to take some pressure off wage inflation. This is helping central banks in advanced economies justify interest rate cuts, which are now gathering pace, the rating agency said in a recent release.

In the United States, the rate rose to 4.3 per cent in July this year from 3.5 per cent a year earlier and in the United Kingdom, it rose to 4.2 per cent in May this year from 3.8 per cent in November 2023.

In Canada, it rose to 6.4 per cent in July from 5 per cent in January 2023, while it was at 3.4 per cent in June in Germany compared to 2.9 per cent in May last year.

In Australia, it rose to 4.2 per cent in July this year from 3.5 per cent in June 2023, while in Switzerland, it increased to 2.5 per cent in July 2024 from 2 per cent in June 2023.

The European Central bank, the Bank of England, the Swiss National Bank and the Bank of Canada have all cut rates in the last two to three months and US 10-year yields have fallen in anticipation of Federal Reserve rate cuts in the near future.

The People’s Bank of China cut its one-year medium-term lending facility rate in July by 20 basis points to 2.3 per cent, and China’s 10-year government bond yields have fallen as well. Banco de Mexico also recently reduced its policy rates.

By contrast, the Bank of Japan increased its uncollateralised overnight call rate from the range of 0 per cent-0.1 per cent to ‘around 0.25 per cent’ and the Central Bank of Russian Federation raised its policy rate by 200 basis points to 18 per cent amid accelerating consumer price index-based inflation that in July reached 9.1 per cent.

Fitch's bi-monthly ‘20/20 Vision’ chart pack covers the 20 major economies.

Fibre2Fashion News Desk (DS)