Vacancies in the UK have slumped to their lowest level in over five years as firms pull back hiring in the face of economic uncertainty and soaring wage costs.
Vacancies Drop Across Key Sectors
The Office for National Statistics (ONS) said vacancies tumbled by 19,000 quarter-on-quarter to 707,000 in the three months to May, which is the lowest since the three months to April 2021. The ONS noted the drop was significant across retail and hospitality sectors and smaller employers, while the largest fall in the quarter was in professional services.
Unemployment Edges Lower
The latest figures show Britain’s rate of unemployment edged lower to 4.9% in the three months to April, down from 5% in the three months to March. The number of workers on payrolls fell by 53,000 during April to 30.3 million, but the more timely flash estimate showed a rise of 2,000 last month, though the ONS stressed this is subject to revision.
Wages Growth Steady but Private Sector Slows
Wages growth remained unchanged at 3.4% in the three months to April after recently easing back, and continues to outstrip inflation rising by 0.3% after taking Consumer Prices Index inflation into account. But regular private sector earnings growth fell to its lowest level for six years, at 2.9%, the ONS said.
Bank of England Decision Looms
The data comes before the Bank of England’s interest rate decision at noon on Thursday, with policymakers widely expected to vote for a hold, at 3.75%.
ONS Comments on Labour Market
Liz McKeown, ONS director of economic statistics, said: “The labour market remained broadly stable in the latest quarter, with further softening evident in some measures. Payroll numbers continued to fall over this period, with new recruits at their lowest level in five years.” She added there were “some signs of workers moving into self‑employment”, while the vacancies decline signalled firms are “becoming more cautious about taking on new staff”.
Impact of Government Policies
The ONS said its vacancies survey showed some firms are putting recruitment on hold due to economic uncertainty and higher labour costs. The Government hiked employee National Insurance Contributions in April last year, while firms have also been hit by above-inflation rises in the minimum wage. On Wednesday, AO World blamed a move to offshore hundreds of jobs overseas on Government measures that have increased staff costs in the UK.
Sectors Hit Hard
Employee-heavy sectors such as retail and hospitality have been knocked particularly hard by the changes. The ONS said on an annual basis, the wholesale and retail trade sector saw the largest fall in vacancies, down 13,000 in the three months to May, while hospitality recorded a 10,000 drop.
Retail Employment at Record Low
Helen Dickinson, chief executive at the British Retail Consortium, said analysis of ONS figures suggested employment in the retail sector had fallen to a record low. She said: “The impact of rising employment costs cannot be ignored. Retail has long been the UK’s main job creator, but that is becoming harder to sustain. If Government is serious about tackling youth unemployment, it must bring down the cost of employing young people and ensure employment reforms support entry-level recruitment and progression.”
Government Response
Work and Pensions Secretary Pat McFadden said: “This month’s figures show that there are 400,000 more people in work than this time last year, but we know ongoing instability in the Middle East is causing uncertainty in our labour market. We have the right economic plan for growth and stability in a volatile world – and we are taking action to create opportunity and make sure that no one is left behind.”
Economic Outlook
Thomas Pugh, chief economist at RSM UK, warned he expects the unemployment rate to peak at 5.3% as “the surge in input costs, tighter financing and higher uncertainty weighs on hiring appetite”. Real wages, after inflation, are also set to stagnate over the coming months as higher fuel costs since the Iran war impacts the cost of living, he said.
