UK Faces Larger Long-Term Sickness Issue Than Believed; May Impact Interest Rates

• New data suggests UK has bigger issue with long-term sickness than thought - 2.8M inactive due to health, up from 2.6M, a one-third increase since pre-pandemic

• Employment 170,000 higher than thought, but more prime-age people inactive - over 30% of inactivity now due to long-term sickness

• Unemployment may have fallen to 3.9% in Nov 2022, lower than previous 4.2% estimate - signals tighter labor market than believed

• This could make Bank of England more cautious about cutting interest rates to ease pay pressures

• But ONS lacking full picture without main Labour Force Survey, replaced by experimental series - so high uncertainty around estimates