Lombardelli warns weaker hiring blunts labor market adjustment
Clare Lombardelli, Bank of England Deputy Governor for Monetary Policy, said UK labor market cooling reflects weaker hiring rather than more firing. Declining job mobility complicates wage adjustment, productivity growth and adaptation to AI.
Less hiring, limited firing
UK activity has held up better than anticipated after the recent energy cost shock, Lombardelli said.
Unemployment has risen gradually and redundancies remain relatively low.
Cooling has mainly taken the form of reduced hiring, protecting existing workers while restricting entry and job changes.
She warned that poor matches between jobseekers and vacancies mean rising unemployment may ease wage pressures less than in the past.
Lombardelli spoke in London on November 10, 2026, at the Bank of England (BoE) Watchers Conference, hosted by King's Business School and the Money, Macro and Finance Society.
She identified three consequences: weaker wage adjustment, lower productivity and growth, and reduced adaptability.
Fewer moves, fewer opportunities
The hiring slowdown follows a longer-term decline in mobility.
Workers change jobs less often, and those moving are less likely to change industry or enter roles requiring different skills.
Lombardelli said this limits movement into jobs that better use workers' abilities and makes recruitment harder for firms.
Young people face particular difficulty taking their first step into employment.
She also said gains from artificial intelligence depend partly on workers' ability to move toward the opportunities it creates.
Low turnover carries costs
Low redundancies do not capture the full cost of a cooling labor market, in Lombardelli's account.
Reduced hiring protects incumbents but restricts access for entrants.
Her warning links weaker mobility to wage persistence, lost productivity and harder adaptation to AI.
Source: The low-gear labour market
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