Odds of the chop increase? Job loss, and the advantages of failing fast

Morning all,

Before this week the odds of a change before Easter were low, but that moved to a knife-edge on Thursday. I’m talking, of course, about the shift in interest rate expectations after four members of the MPC unexpectedly voted for a cut.

It was certainly a dramatic week, delivering a Resolution Foundation first – we made the headlining slot of Farming Today for our report on decarbonising agriculture. So, new stretch target for 2026: get a mention in the Archers.

If you prefer serious analysis of the country’s malaise to Westminster psycho-drama, catch up on our new podcast discussing the UK’s growth prospects, and watch out for our book Unsung Britain, which we’re launching next Tuesday. Tickets have been snapped up, but if you’re keen to hear the findings from our 18-month programme of work – and to hear what Andy Burnham, Ken Murphy, Clare Moriarty and others make of it – please tune in to the livestream from 9am. Plus, Chart of the Week offers a sneak peek of our findings…

For those worried about job losses (after the Bank’s increased unemployment expectations) read on for the *good* news in their forecast and why sometimes it’s best to fail fast – despite job loss leading to a lengthier commute.

Have a great weekend,

Ruth

Chief Executive
Resolution Foundation

Smart money’s on the quitters. This field experiment examined whether entrepreneurship training helped 552 American tech startups succeed. The confusing answer is it helped them to fail… better. Start-ups randomly assigned intensive training were over 50 per cent more likely to shut up shop – but the trained startups that continued significantly outperformed their untrained peers, raising 288-346 per cent more funding and generating higher quarterly revenue. It looks as though training helps entrepreneurs quit bad ideas faster (“fail fast”) and succeed more with good ones – they’re making smarter choices, not just getting discouraged. As we’ve been saying for a while, the UK economy needs more of this kind of creative destruction if we want to up our productivity. Time to train the zombies?

Not so terrible tariffs? Liberation Day was dramatic. The trade data, less so. So says this new blog examining the impact of Trump’s war on free trade. Global trade patterns barely changed between April’s “liberation day” and October, even after the imposition of tariffs of 10 per cent or higher on most US trading partners. Firms and governments adapted quickly:  rerouting supply chains rather than abandoning them, rushing exports before tariffs hit, and mostly avoiding retaliation. Among 19 countries that struck deals with the Trump administration, nine saw their US trade share move by less than one percentage point (although UK exports to America dropped by 1.8 per cent). For now, the new world order is yet to arrive.

Sentence commuted. A new paper (non-paywalled version here) identifies a fun new dimension in which losing your job sucks. When workers lose their jobs involuntarily they not only earn less but also commute further. Using German data, researchers found displaced workers travel 23 per cent (3.4 kilometres) further to their new jobs. The study estimates average daily commuting costs at €20.20, meaning longer commutes add roughly one-fifth to the total financial cost of job loss beyond wage cuts alone. This effect fades over time as people switch to closer jobs, not by moving house. Of course, if your current commute is walking down the Downing Street staircase then it’s hard to find to a shorter one.

Swipe out. Since we’ve solved the stable marriage problem, this week we’re trying to figure out dating apps. This paper examines how online dating impacted rates of marriage, divorce and STDs in America between 2002 and 2023. Back in the ‘desktop’ era of eHarmony, an increase in online dating saw an increase in divorce rates – arguably not a great advert for the matching power of such websites, although don’t forget Ashley Maddison was also in its heyday. When Tinder et al. entered the scene from 2017 onwards, higher usage actually lowered marriage rates – perhaps because continuing to swipe is just too easy. Divorce rates dropped too, but cutting divorce rates by cutting marriage rates is like cutting waiting lists by increasing unreported removals…

Something for the weekend | Dove at first sight

This week’s interest rate decision and Monetary Policy Report from the Bank of England were spicier than expected. The MPC were one vote away from an unexpected cut, and they’re forecasting inflation will soon drop sharply and stay low, reaching 2 per cent by June – nearly a year earlier than previously thought.

This is driven by falls in energy prices, with a bit of help from lower services and food inflation. Back at November’s Budget, people mused whether one-off price reductions from the government on energy bills would affect Bank decisions or whether, as is traditionally assumed, they would “look through them”. Box D in the MPR settles the debate – lower near term inflation, means lower risk of inflation persistence. So Budget decisions affect Bank decisions.

Part of the greater monetary wiggle room, though, comes from a lower growth forecast and weakening labour market. But the wage growth forecast hasn’t changed much, keeping the Bank in a much more optimistic position on this than the OBR. They now project more than twice as much real pay growth in the next three years (3.5 per cent, private sector) as the OBR does over the next five (1.6 per cent, whole economy). Here’s hoping.

Chart of the week

I’m not giving the game away when I say that cost of living pressures loomed large for the families we spoke to as part of our Unsung Britain project – a priority which has been clearly noted by the PM who remarked that every minute not spent on the topic was “a wasted minute“. By 2023-24, essentials represented 50 per cent of spending for families with below average incomes,against just 41 per centfor families in the top half of incomes. This cost of essentials gap between rich and poor has only widened over time. In the early 2000s it was just 5 percentage points. Fast forward to the 2020s and it has almost doubled to 9. Further analysis, to be published in Unsung Britain, reveals that in the six years leading to last autumn, annualised inflation experienced by the poorest families ran at a rate that was 0.7 percentage points faster than for the richest families. The cumulative effect of this has been to drag down incomes for the very lowest income households relative to those at the top by more than 3 per cent. While better off households can weather higher costs by cutting back on discretionary spending, for many poorer families every extra pound on the energy bill or weekly shop means tough choices elsewhere, with half their budgets already put towards staying fed, clothed, warm and mobile.