The UK jobs market saw another dip in vacancies, while private sector wage growth reached a near six-year low, 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 over five years, or since 2014 outside the pandemic years.
Small firms hold back on hiring
Vacancies had already slumped earlier in the year, indicating firms were pulling back on hiring amid economic uncertainty and higher wage costs. The ONS survey found that small firms may not be recruiting due to increased labour costs and other business expenses.
Regular average wage growth in the private sector fell to 2.8% in the three months to June, the lowest since the three months to October 2020. Overall regular wage growth rose to 3.5% in the same period, up from 3.4% in the three months to April, driven by a 6.1% increase in the public sector from NHS pay awards.
Unemployment steady, pay trends mixed
The UK’s unemployment rate remained unchanged at 4.9% in the three months to June.
Liz McKeown, ONS director of economic statistics, 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.”
She 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.”
Experts warn of cost of living squeeze
Experts suggested 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. 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.”
He added: “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.”
