UK Job Vacancies Fall to 707,000, Five-Year Low; Businesses Cut Recruitment
The number of job vacancies in the UK has fallen to 707,000 between March and May, marking the lowest level since February to April 2021. This decline signals a notable shift in the labour market, with businesses curtailing their recruitment activities.
Businesses Cautious on New Hires
Liz McKeown, director of economic statistics at the Office for National Statistics (ONS), indicated that the sustained drop in job vacancies suggests firms are becoming more cautious about taking on new staff. The professional services sector experienced the most significant fall in vacancies, while retail and hospitality also reported substantial reductions.
Data from HMRC further substantiates this trend, showing that new recruits in April numbered just under 540,000, the lowest monthly figure since March 2021. This reflects a five-year low in new hires. Against this backdrop, there are "some signs of workers moving into self-employment" as traditional job opportunities diminish.
Wage Growth and Inflationary Pressures
Despite the fall in vacancies, the unemployment rate saw a slight decrease to 4.9% in the three months to April, down from 5% in the preceding three months. Regular pay, excluding bonuses, grew at an annual rate of 3.4% during the same period, consistent with the previous quarter. This indicates that average earnings are still rising marginally faster than prices. However, McKeown highlighted that regular wage growth in the private sector is at its lowest rate in five and a half years.
Jamie Younger, who recently opened The Victory pub in south London, explained that increases in the minimum wage and national insurance contributions have "made life very difficult" for businesses. He noted that many pubs and restaurants are now prioritising experienced staff, rather than supporting younger individuals entering the job market. Younger suggested that a cut in VAT could alleviate pressure and enable businesses to invest in training younger workers.
Shazia Ejaz, Director of Campaigns at the Recruitment and Employment Confederation (REC), pointed to "global pressures and domestic political uncertainty" as factors contributing to employer hesitancy in hiring. She noted that temporary hiring is outperforming permanent recruitment.
Bank of England Holds Rates Amid Economic Weakness
These employment figures precede the Bank of England's decision to maintain interest rates at 3.75%. Bank Governor Andrew Bailey acknowledged that falling oil prices, following a recent peace deal between the US and Iran, were "encouraging" but cautioned that "inflationary pressure in the pipeline" persists.
Yael Selfin, Chief Economist at KPMG UK, commented that the labour market is not a primary driver of inflation, citing easing private sector wage growth. She stated, "Against a weak economic backdrop, workers are increasingly reluctant to push for higher pay, reducing the likelihood of second-round effects feeding through from the labour market into wider cost pressures." Selfin anticipates a continued slowdown in pay growth in the coming months.
It is worth noting that the ONS statistics have faced scrutiny in recent years, with a review last year identifying "deep seated" issues, particularly concerning the low response rates of the Labour Force Survey, which informs payroll and employment figures.
