Unemployment remains steady but vacancy rates drop and pay growth slows. Employers cut back on annual pay increases and pared back hiring in recent months as the economic slowdown took its toll on the labour market.
Data from the Office for National Statistics (ONS), released on Tuesday, showed that Britain’s official unemployment rate was unchanged at 4.7% in the three months to June.
Pay growth including bonuses dropped from 5% to 4.6% over the same period.
Giving a strong indication of employers’ reluctance to hire new staff, the vacancy rate fell by 44,000. The drop of more than 5% in the three months to June on the previous quarter was the 37th consecutive fall in vacancies and took the total to well below pre-pandemic levels at 718,000.
https://38728792f9c3e1569a388fae3bf42706.safeframe.googlesyndication.com/safeframe/1-0-45/html/container.html The ONS said its research “suggests some firms may not be recruiting new workers or replacing workers who have left”.
Last month, data showed the unemployment rate had risen to 4.7% in the three months to May, while pay growth slipped from 5.3% to 5%.
Suren Thiru, economics director at the accountancy body, the ICAEW, said the rise in employer national insurance in April was still taking a toll on firms hiring new staff.
“The UK jobs market is facing more pain in the coming months with higher labour costs likely to lift unemployment moderately higher, particularly given growing concerns over more tax rises in this autumn’s budget,” he said.
The figures supported the Bank of England’s view that the jobs market and pay growth were weakening, he said, but was unlikely to bring forward further interest rate cuts after a quarter-point cut to 4% last week.
“While these disheartening figures will reassure rate-setters that last week’s policy loosening was the right call, the pace at which the labour market is currently cooling is unlikely to be sufficient to prompt another rate cut in September,” he added.
Financial markets had expected unemployment to remain steady at 4.7% and for the rise in average earnings, including bonuses, to slow, from 5% to 4.7%.
Recent surveys have shown businesses reducing the number of job postings as they grapple with rising employment costs and worry about the economic outlook.
The Chartered Institute of Personnel and Development said on Monday that hiring intentions among Britain’s businesses remain at a record low, with young people hit hardest by the drop in recruitment.
Almost three in five (57%) of private sector employers said they plan to recruit staff in the next three months – compared with 65% in autumn 2024 – as they deal with the £25bn rise in employer national insurance contributions costs and higher minimum wage that took effect in April.
Another report out on Monday, from KPMG and the Recruitment and Employment Confederation (REC), showed that recruitment across the UK fell sharply in July, for permanent and temporary jobs.
The report showed the steepest reduction in vacancies since April. A rise in the number of people returning to the workforce and university graduates seeking a job meant the availability of workers rose at one of the fastest rates since the survey began in 1997.