- Job vacancies have fallen to 707,000, their lowest level in more than five years.
- Small businesses say rising labour and operating costs are making recruitment harder.
- Private sector pay growth has slowed to its weakest level in almost six years.
Finding a new job in Britain could be getting harder as employers become more cautious about hiring and the number of available vacancies falls to its lowest level in more than five years.
The UK recorded 707,000 job vacancies between May and July, according to the Office for National Statistics (ONS). The slight fall from the previous period points to a labour market where businesses are becoming less willing to add workers as the cost of employing them continues to rise.
For people already in work, that could mean a less forgiving market when it comes to changing jobs, negotiating higher pay or finding new opportunities. For those trying to enter the workforce, fewer vacancies could make the search even more competitive.
The unemployment rate remained at 4.9 per cent, while the ONS described the labour market as “little changed overall”. But the vacancy figures suggest that employers' appetite for recruitment is weakening even without a sharp change in unemployment.
Pay is also beginning to tell a similar story. Regular earnings, excluding bonuses, rose by 3.5 per cent in the three months to June compared with a year earlier. That was partly driven by strong public sector pay growth of 6.1 per cent, following the timing of the latest NHS pay awards.
Private sector pay was a different story, rising by just 2.8 per cent, its slowest growth in almost six years.
Why businesses are becoming more cautious
The biggest pressure appears to be coming from the cost of employing people.
The ONS said smaller businesses were citing labour and operating costs as reasons for scaling back recruitment. Firms are already dealing with higher National Insurance and minimum wage costs, while energy prices have also risen since the outbreak of the Iran war.
There is another potential cost on the horizon. Government analysis released last week estimated that a planned crackdown on zero-hours contracts could cost businesses as much as £2.9 billion a year. The changes would reduce the number of hours workers can work before they must be offered guaranteed hours.
The British Chambers of Commerce has warned that business confidence has fallen to a post-pandemic low. Patrick Milnes of the organisation reportedly said many firms would be reassessing their recruitment plans because of the changes to zero-hours contracts.
Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, reportedly described the UK labour market as being in a “low-churn limbo”, with employers reluctant to hire, fire or offer larger pay rises while dealing with higher costs and economic uncertainty.
He also pointed to greater automation as another factor that could be squeezing some entry-level roles.
Could weaker pay change the interest rate picture?
The slowdown in wages may offer one small relief for the wider economy.
Analysts see little evidence that current pay growth is creating fresh inflationary pressure, which could make it less likely that the Bank of England raises interest rates at its September meeting.
KPMG chief economist Yael Selfin reportedly said underlying wage pressures remained contained and expected interest rates to stay on hold for the rest of the year.
The jobs figures come as the wider UK economy faces an uncertain second half. GDP grew by 0.4 per cent between April and June, which the ONS described as relatively robust, although economists expect growth to slow.
There is also concern over the impact of the Iran war on global trade. Internal forecasts presented to the new prime minister and chancellor reportedly suggested UK growth could fall to as little as 0.3 per cent in 2027 if disruption to shipping through the Strait of Hormuz continues.
For now, the jobs market has not suffered a dramatic rise in unemployment. But with vacancies falling, private sector pay growth weakening and businesses becoming more reluctant to recruit, the bigger question is whether the slowdown remains contained or starts making the job hunt noticeably harder for more people.
