UK job vacancies have fallen again, while private sector wage growth has dropped to its lowest level in nearly six years, according to new figures from the Office for National Statistics (ONS).
The ONS said early estimates show around 6,000 fewer vacancies between May and July compared with February to April, bringing the total to 707,000 — the lowest level in more than five years, or outside the Covid pandemic years, since 2014.
Small firms hold back on hiring
Vacancies slumped earlier in the year, signalling that firms were pulling back on hiring amid economic uncertainty and higher wage costs. The latest ONS survey found that small firms may not be recruiting because of increased labour costs and other business expenses.
ONS director of economic statistics Liz McKeown said: “Vacancies remain broadly flat, though a small fall in the latest period puts them at the lowest level in more than five years. The latest decrease was driven mainly by smaller businesses, which cite labour and operating costs as reasons for not hiring new staff or replacing leavers.”
Pay growth trends diverge
The data revealed that regular average wage growth in the private sector fell to 2.8% in the three months to June — the lowest level since the three months to October 2020. This is despite overall regular wage growth rising to 3.5% in the same period, up from 3.4% in the three months to April, driven by a 6.1% increase across the public sector as a result of NHS pay awards.
McKeown added: “Regular wage growth has remained broadly stable in recent months. However, private sector pay growth has continued to ease, while public sector pay growth remains elevated due to the timing of the latest NHS pay awards.”
Unemployment steady, payrolls dip
The UK’s overall unemployment rate remained unchanged at 4.9% in the three months to June, while the number of workers on payrolls fell by 13,000 between May and June.
Experts said the downturn in private sector pay could signal a squeeze in the cost of living amid higher energy costs linked to the Iran war. Suren Thiru, chief economist for the Institute of Chartered Accountants in England and Wales (ICEAW), said: “The UK labour market remains stuck in a low-churn limbo, with employers reluctant to hire, fire or offer bigger pay rises as they grapple with rising costs, intensifying global headwinds and heightened policy uncertainty.”
Thiru added: “Cooling private sector wage growth is a double-edged sword for the economy, reducing the risk of interest rate rises by limiting inflationary spillovers from the Iran war-induced energy shock, but also signalling a deepening cost of living squeeze. The persistent slide in vacancies is a red flag for the jobs market, suggesting labour demand is shrinking amid soaring employment and energy costs, while greater automation is also squeezing some entry-level roles.”
Bank of England may hold rates
Economists suggested that weaker wage growth in the private sector could encourage the Bank of England to keep interest rates on hold. Yael Seflin, chief economist for KPMG, said: “With underlying wage pressures remaining contained, there is little reason for the Bank of England to shift course, and we expect rates to remain on hold for the remainder of the year.”
Seflin added: “Although hiring intentions have improved somewhat in recent months, labour demand remains weak by historical standards. A more sustained recovery is likely to depend on geopolitical uncertainty easing. Businesses may also remain hesitant ahead of the autumn Budget as they assess the potential implications of any tax changes.”
