The UK labour market is experiencing a gradual cooldown, according to recent data, but economists emphasise this is a slowdown—not a collapse. While hiring has eased and wage growth shows signs of moderation, the fundamentals remain stable.
Key Indicators Point to a Controlled Slowdown
Recent figures reveal a decline in job vacancies and a slight uptick in unemployment, suggesting employers are becoming more cautious. However, the overall employment rate remains resilient, with no sharp spikes in redundancies.
Wage Growth Moderates but Stays Above Inflation
Average earnings continue to rise, though at a slower pace than in previous months. Crucially, wage growth still outpaces inflation, providing some relief to households amid cost-of-living pressures.
What’s Driving the Change?
Several factors contribute to the cooling trend:
- Economic uncertainty: Businesses are hesitant to expand workforces amid mixed economic signals.
- Higher interest rates: The Bank of England’s monetary policy is dampening hiring momentum.
- Post-pandemic normalisation: The labour market is settling after the extreme volatility of recent years.
Outlook: Soft Landing or Stagnation?
Most analysts expect a gradual adjustment rather than a sharp downturn. If inflation continues to ease, the Bank of England may cut rates, potentially reviving hiring later in the year.
For now, the labour market slowdown appears manageable—but policymakers will be watching closely for any signs of deterioration.
