Job vacancies in the UK have fallen below 700,000 for the first time in over five years, according to official figures, as the labour market continues to show signs of slowing.
The Office for National Statistics (ONS) reported that vacancies fell by 21,000 in the three months to September, bringing the total to approximately 691,000 – the lowest level recorded since April 2021.
Unemployment rate edges down
The data also showed that the unemployment rate edged down slightly to 4.7 per cent, while wage growth continued to lose momentum.
Annual growth in employees' earnings stood at 3.7 per cent, excluding bonuses, marginally above economists' forecasts of 3.6 per cent.
Including bonuses, annualised pay growth was also 3.7 per cent between June and August, falling short of expectations and representing a decline from the three-month period between May and July.
Vacancies fall concentrated in smaller businesses
David Freeman, deputy director of labour market statistics at the ONS, said: "The number of vacancies has seen its largest fall since the start of the year, concentrated mainly within smaller businesses, which cite increased labour costs as a key factor."
Economists have broadly suggested that a softening jobs market could deter the Bank of England from raising interest rates in its bid to tackle the effects of elevated prices. The central bank's projections indicate that inflation could climb above four per cent during the opening months of 2027.
Interest rate outlook
On Wednesday, CPI inflation is forecast to reach 3.4 per cent, pushing further beyond the Bank's two per cent target rate.
A number of policymakers serving on the Bank's Monetary Policy Committee have cautioned that a sustained increase in energy costs could compel the Bank to raise interest rates from 3.75 to four per cent come November.
Officials have thus far held interest rates steady, remaining vigilant instead for indications of so-called "second round effects". This phenomenon, whereby price pressure from an initial shock becomes entrenched within an economy through wage and price-setting mechanisms, has yet to emerge.
Elevated unemployment levels and a shortage of job vacancies mean workers have less leverage to negotiate higher pay.
MPC members weigh in
Huw Pill, who holds the most hawkish record amongst Monetary Policy Committee members, suggested that despite the absence of second-round effects so far, the prospect of a 20 per cent surge in energy bills next year meant the Bank ought to have backed an interest rate rise at the onset of the war to demonstrate it was "active".
"It would have been good to move early and influence market expectations, and send a clearer signal we were active and agile," the Bank's chief economist remarked. "I don't think we have been in a good place."
However, speaking at an International Monetary Fund meeting in Bangkok, he said he was "sceptical" about the need for four interest rate rises, even as the conflict in Iran threatens to push inflation higher.
Megan Greene, an external member of the Monetary Policy Committee (MPC), argued that robust economic growth this year demonstrates that relatively elevated interest rates have failed to suppress activity within the UK economy.
