Unemployment rates remained steady over the past three months – but annual growth in earnings grew, new data shows, as the outlook for UK businesses continues to look difficult.
The Office for National Statistics (ONS) said the rate of UK unemployment hit 4.7 per cent in the three months to June. It was the same as the previous three-month period, which had been highest level since June 2021.
Meanwhile, average earnings growth, excluding bonuses, remained at 5 per cent for the period.
It came as UK job vacancies tumbled by 44,000 over the three months to July to 718,000 – the lowest number of job openings since April 2021.
While fewer job opportunities would of course become problematic over the longer term, this year the Bank of England – and thus the wider economy – has been more troubled by the rate of wage growth, which contributes to stoking high inflation levels. That has appeared to be dropping off recently, with employers cutting back on new hires due to other expenses including hiked National Insurance and minimum wage payments.
“Taken together, these latest figures point to a continued cooling of the labour market,” said ONS director of economic statistics Liz McKeown.
“The number of employees on payroll has now fallen in ten of the last twelve months, with these falls concentrated in hospitality and retail. Job vacancies, likewise, have continued to fall, also driven by fewer opportunities in these industries.
“Growth in basic pay stayed steady, while including bonuses the rate slowed a little, though nominal growth remains strong by historic standards. However, real pay growth fell, due to rising inflation. Private sector basic pay growth also edged down and remains below the public sector rate, which increased.”
Richard Carter, at Quilter, pointed to recruiters reporting “falling vacancies, more candidates chasing fewer roles, and wage pressures beginning to ease” as data which potentially adds to the signs that the market is weakening.
However, with inflation at 3.6 per cent and expected to continue to rise into the second half of the year, jobs data will continue to be a key factor in deciding whether to further cut interest rates further, likely in November.
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Firms offering out fewer job opportunities and slowing the rate of wage growth they are offering is a direct result of cost pressures they are facing from all angles, said Jane Gratton, deputy director of public policy at the British Chambers of Commerce (BCC).
“With businesses feeling the heat from a raft of cost-pressures, a larger easing of average earnings, including bonuses, to 4.6% in June will be welcomed,” Ms Gratton said.
“Continued wage growth is creating real challenges for business and the wider economy. It’s an important factor behind persistent services inflation. It’s also impacting on job opportunities. While unemployment remains fairly stable, we know many businesses have held back on recruitment and others have shed jobs – following the national insurance hike earlier this year. Labour costs remain the biggest cost pressure for firms, cited by 73% of respondents in our latest survey.
“There is a limit to how many additional costs businesses can absorb. It’s crucial that there are no more taxes on business in the forthcoming budget. Whether it’s young people entering the labour market, people looking to return to work, or those wishing to develop in their career – they all rely on thriving businesses.
“The government must help, not hinder, businesses to attract and retain the people and skills needed to grow our economy.”
Additional reporting by PA