UK employers cut payrolled jobs again in July and vacancies slid to a five-year low, while unemployment ticked up to 4.9%. Pay growth held at 3.5% overall, but the gain came entirely from public sector wages as private sector pay kept slowing.
UK payrolled employee numbers fell by 13,000 in June from May, a bigger drop than the 4,000 fall first reported, and preliminary figures point to a further 13,000-job decline in July. The Office for National Statistics said unemployment rose to 4.9% in the three months to June, up from 4.8% in the three months to May.
Vacancies fall to a five-year low
Job vacancies dropped to 707,000 in the three months to July, down from 711,000 in the three months to June and the lowest reading in more than five years. Smaller firms drove the pullback, citing labour and operating costs as reasons to scale back recruitment. Soft hiring in consumer-facing sectors such as retail and hospitality suggests younger workers will bear the brunt of the weakness, according to Jake Finney, senior economist at PwC UK.
Pay growth splits along public-private lines
Regular earnings excluding bonuses held at an annual pace of 3.5% in the three months to June, but the composition shifted. Private sector regular pay growth slowed to 2.8% in the April-to-June period, the weakest since October 2020, while public sector wages accelerated on the timing of the latest NHS pay awards.
According to the BBC: "The UK labour market remains stuck in a low-churn limbo", said Suren Thiru, chief economist at the ICAEW.
Rate-hike pressure eases
The soft labour market is part of the reason the Bank of England has left interest rates unchanged at 3.75% at its recent meetings, even as energy costs tied to the Iran conflict weigh on the outlook. Capital Economics said the weak labour market is not conducive to second-round inflation effects and does not expect the Bank of England to raise rates from the current level. Analysts at KPMG likewise see little reason for the Bank of England to shift course, expecting rates to stay on hold for the rest of the year.
Sources: FT, BBC News, Investing.com
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