UK employers cut the number of job vacancies in June, according to official figures that highlight the UK's “fragile” economic outlook amid the conflict in the Middle East.
Job vacancies fell to 712,000 – almost half the level in 2022 – as employers put off hiring new staff in the three months to May, the Office for National Statistics said.
Separate figures showed unemployment remained at the same level in May as in April, at 4.9%, showing the tough task ahead for Andy Burnham as he seeks to inject renewed vigour into the economy.
Pay growth and economic outlook
The new prime minister has promised to raise living standards across all regions as part of a 10-year economic plan, due to be unveiled later this year, but the latest pay data showed private sector earnings growth dropped to 2.9% to leave the average rise in earnings, including bonuses, at 4.3%.
Economists had forecast a rise in average pay with bonuses in the three months to May of 4.5%, up from 4.4% for the three months to the end of April. They had also expected unemployment to rise to 5% for the same period, from its rate of 4.9% in the three months to April.
The UK's jobs market has weakened over the past two years, with unemployment rising steadily from a low point in the summer of 2022 of 3.6%. Last year the unemployment rate peaked at 5.2% before falling back slightly during a more settled period after the autumn budget and before Donald Trump's attack on Iran.
Expert and union reactions
Suren Thiru, the chief economist at the accountancy body ICAEW, said: “These figures point to a fragile labour market, with soaring employment taxes and the economic turbulence sparked by the Iran war pushing some firms to limit recruitment and cut pay awards.”
He added: “The continued fall in job vacancies is a stark warning that demand for staff is dissipating under the weight of sky-high staffing costs, more onerous regulation and heightened uncertainty. Jobseekers will probably face more strain over the summer, with unemployment likely to edge noticeably higher as elevated cost pressures and weakening demand increasingly inhibits hiring – especially if uncertainty over future tax policy persists.”
Unions have called on Burnham to ease cost of living pressures as part of a broader package of measures to boost incomes and economic growth. The TUC general secretary, Paul Nowak, said Burnham had started positively with a pledge to cut VAT on electricity bills.
He said: “Working people are up against it with stagnant real pay, over a million people stuck on insecure zero-hours contracts, and a million young people not in employment, education, or training. Cutting VAT on energy bills will provide some welcome relief. But with Donald Trump's illegal war in Iran continuing to drive up bills, the government will need to go further.”
He said Burnham could raise up to £60bn over four years from a tax on bank profits “and use it to bring down bills further for households across the country”.
Government and shadow minister comments
A government spokesperson said the employment figures showed too many young people were still “locked out of work”. They said: “For too long, governments have paid for failure rather than invested in people's success. We're determined to turn that around by creating real opportunities for young people, reforming education so everyone has a clear path to a good job and providing the support people need to stay and get on in work.”
Helen Whately, the shadow work and pensions secretary, said Labour had damaged the jobs market with a succession of tax rises. “Higher taxes means lower growth and fewer jobs. The welfare secretary himself said every meeting he had with Labour MPs was about who they could tax more to pay for more benefits.”
Impact on interest rates
Economists said the fall in private sector pay growth would ease pressure on the Bank of England to raise interest rates to calm inflation. Several Bank of England officials have expressed concern about pay growth remaining stubbornly high, adding to the costs of production and putting pressure on inflation. Rate-setters at the Bank meet next week and are expected to hold interest rates at 3.75%.
