UK jobs market cools as vacancies fall

The UK jobs market is continuing to cool, with the number of vacancies and employees on payroll both falling in the latest official estimates.

According to the Office for National Statistics (ONS), job openings fell by 5.8% between May and July, with nearly every industry seeing a drop. The ONS said there was evidence that some companies were holding back on new recruitment or not replacing staff who had left. However, the overall slowdown was not as sharp as some economists had predicted.

Key Figures 📊

The latest data shows a mixed but cooling picture of the UK economy:

• The unemployment rate remained unchanged at 4.7%.

• The number of employees on payrolls is estimated to have fallen by 8,000 between June and July.

• Average wage growth stood at 5%.

• Job vacancies are at their lowest level since the three months to April 2021.

Former Bank of England policymaker Andrew Sentance said the data indicated a “very gradual cooling” of the labour market. He noted that with more than 30 million people on payrolls in the UK, the 8,000 drop was relatively small.

The ONS has advised that its payroll figures should be treated with some caution and that it is taking action to address questions regarding the data's accuracy. However, Ashley Webb, UK economist at Capital Economics, said the “modest decline” in payroll numbers suggests the slowdown caused by higher business taxes and minimum wage increases is bottoming out. The National Living Wage recently rose from £11.44 to £12.21, while Employer National Insurance Contributions also increased.

Political Reaction

Chancellor Rachel Reeves said there was “some really good news” in the reports but acknowledged there was “more to do” to reduce the unemployment rate, which remained at a four-year high between April and June. “Everybody who can work should be working,” she said. “As a government, we're committed to helping more people return to work.”

However, Helen Whately, the shadow work and pensions secretary, called the figures the “sad but predictable result of Labour's war on industry,” which she said has seen “taxes rise to historic highs and employers strangled in reams of red tape.”

Business Impact

Business owners say the economic climate has made it difficult to turn a profit. Louise Maclean, business development director of the Scottish hospitality company Signature Group, said profitability was “just so difficult.”

“We're trying to be so careful with every hour of work we do to make sure we increase efficiency, serve customers faster, and serve them better,” she told BBC Radio 4’s Today programme.

Ms Maclean added that while her company might have previously focused on recruiting 17 or 18-year-olds, the current climate has changed their hiring strategy. “Unfortunately, without experience, the younger people are less attractive at the moment,” she said. “Slightly older people who have work experience... know what the customers want and are more useful.”

Economic Outlook

Labour peer Baroness Jacqui Smith told the Today programme that the government’s economic policies had helped stabilise the UK economy. “There are some key signals that the decisions we took to repair the foundations of the economy are now enabling us to move forward,” she said, referring to the Bank of England’s decision to cut interest rates last week.

Monica Michail, an associate economist at the National Institute of Economic and Social Research, said the fall in job vacancies is likely to contribute to a moderation in wage growth. This is a key metric the Bank of England considers when setting interest rates, as rapid wage growth can fuel inflation. The Bank’s inflation target is 2%, but the rate has risen in recent months due to higher food and energy prices.

Ms Michail forecast that borrowing rates would decline from their current 4% to 3.75% by November.