Unemployment as a percentage of the labour force is expected to tick slightly to 4.0% in 2023 from 3.9% in 2022, Fitch Solutions has revealed.

Over 2004, it forecast unemployment to hold at 4.0%, and if accompanied by easing inflation, will see a rise in real wages for many households.

“While this is a marginal increase that should not have much bearing on consumer incomes, the unemployment rate has been rising since 2017 and is expected to continue on this path over the medium term and beyond”.

The UK based firm pointed out that that the size of the country's labour force is reduced by low life expectancy at around 64.3 years of age, which is itself a result of the low level of government expenditure on healthcare and the prevalence of water-borne diseases and chronic illnesses such as HIV/AIDS. 

“A shortage of highly skilled workers also means that employers have to import workers from abroad to fill the gaps in the domestic workforce”, it added.

High levels of household debt remain a risk

Furthermore, Fitch Solutions said the high levels of household debt remain a risk to “our consumer outlook, as it limits the future availability of debt, but also draws on current disposable incomes levels, especially as debt servicing costs increase on the back of interest rate increases”.

In the majority of markets, it noted central banks have raised interest rates at record speeds over the 2022-2023 period, reaching rates that most households have not been accustomed to over the last decade.

Similarly, it explained central banks are showing few signs of cutting rates, suggesting that households will have to face an environment where debt servicing costs will be higher for longer.