The UK labour market continues to soften as hiring appetite weakens. It’s one characterised by widespread caution, with the dampening impact of April’s rise in employer costs reinforced by global headwinds and uncertainty over the government’s Workers’ Rights Bill.
Sharper-than-expected falls in wage growth and payrolled employment suggest a more material pace of labour market cooling may be starting to emerge, which could help open the door to a faster pace of interest rate cuts from the Bank of England.
The labour market hasn’t collapsed, though, and the fact that redundancy notifications remain low offers some reassurance that we’re not about to see a sudden spike in job losses. The unemployment rate has gradually crept up to 4.6%, its highest since July 2021, albeit the accuracy of this figure continues to be caveated by data quality issues.
But continued gradual increases in the unemployment rate are likely, especially as job vacancies continue to slide. Job postings on Indeed, meanwhile, remain well below pre-pandemic levels, suggesting less-than-normal hiring.
