UK Job Vacancies Hit 5-Year Low Amid Recruitment Cutbacks

The number of UK job vacancies fell to its lowest level for five years as businesses cut back on recruitment, official figures show, despite signs the labour market has been more resilient to the Iran war than feared.

The latest figures from the Office for National Statistics (ONS) showed unemployment eased to 4.9% in the three months to April, from 5% in the three months to March.

However, the number of people in employment also fell, especially in the retail and hospitality industries, indicating that employers became wary of hiring new staff as the war began.

The number of job vacancies in the March to May period fell by 19,000 to 707,000, the ONS said, the lowest level since February to April 2021.

Average wages excluding bonuses remained the same at 3.4%, and rose 4.4% excluding bonuses, flat on the previous month after a revision up from 4.1%.

Economists had expected the unemployment rate to remain at 5%, and for wage growth to ease to 4%.

Annual average regular earnings growth was 5.1% for the public sector and 2.9% for the private sector.

The Bank’s governor, Andrew Bailey, has cited strong public sector pay as a concern for its monetary policy committee, which is expected to hold rates at 3.75% later on Thursday.

Ashley Webb, an economist at the consultancy capital economics, said rises in the cost of borrowing this year were unlikely while the economy remained weak. “The big picture is that the labour market is still very weak, and likely to weaken further.”

Analysts said the central bank would be concerned that a downward trend in wages had stalled, which could increase spending in the economy more than expected and prevent inflation falling back to the MPC’s target of 2%.

The ONS said on Wednesday that the consumer prices index remained steady at 2.8% in May.

Webb added: “Today’s data release increases the chances of one or two ‘insurance’ hikes later this year.” But he said the rises were unlikely while the economy remained weak. “The big picture is that the labour market is still very weak, and likely to weaken further.”

James Smith, an economist at ING, discounted the effect of higher wages in the public sector, which have been affected by delayed pay deals, saying the focus would be on the private sector, where wages and employment continued to fall, especially in retail and hospitality.

“While the Bank of England can’t totally ignore [the public sector], it remains much more focused on the private sector. And here pay growth is still easing off.

“The annual rate is now below 3%, a sizeable drop from 5.2% a year ago. The three-month annualised rate is even lower and suggests that the annual rate has further to fall in the near-term.”

Employers were less likely to take on permanent full-time staff than they were earlier in the year in response to the war in the Middle East, which has shaken business and consumer confidence.

PAYE payroll employment rose by 2,000 in May, but the rise only partly offset a chunky 53,000 fall in April.

Fears have grown in recent months that employers will lay off staff to cope with rising costs from the war in Iran. But a fall in oil prices in recent days, linked to hopes for a peace deal between the US and Iran, could feed through into lower energy bills for businesses, easing cost pressures on them.

The work and pensions secretary, Pat McFadden, said: “This month’s figures show that there are 400,000 more people in work than this time last year, but we know ongoing instability in the Middle East is causing uncertainty in our labour market.

“We have the right economic plan for growth and stability in a volatile world – and we are taking action to create opportunity and make sure that no one is left behind.”