Experts have blamed a slowdown in the jobs market on a tax and cost increases for employers announced by Chancellor Rachel Reeves in the autumn Budget
Britain’s jobless rate has surged to its highest level for nearly four years, with wage growth dropping.
Some experts blamed the slowdown in the jobs market on Chancellor Rachel Reeves for landing firms with higher costs amid evidence that employers were holding back on hiring.
Figures from the Office for National Statistics showed the rate of unemployment jumped to 4.6% in the three months to April, up from 4.5% in the three months to March and the highest level since the three months to July 2021.
Average pay increased by 5.2% between February to Apri, down from 5.5% in the previous three months period, and the lowest since July to September last year.
The data also revealed how public sector workers are getting bigger pay rises than in the private sector – at 5.6% versus 5.1%. Most workers are still seeing wages rise faster than inflation, meaning they should have more money in their pocket – at least in theory.
The easing in wage growth, while a setback for workers, is seen as important for the Bank of England when deciding when next to cut interest rates.
However, the figures also provided more evidence of cracks appearing in the labour market. The estimated number payrolled employees decreased by 55,000 between March and April, with an even bigger 109,000 drop in May, although the ONS urged caution about reading too much into the number as it was prone to revisions.
Meanwhile, the estimated number of vacancies fell by 63,000 to 736,000 in March to May.
Liz McKeown, director of economic statistics at the ONS, said: “There continues to be weakening in the labour market, with the number of people on payroll falling notably. Feedback from our vacancies survey suggests some firms may be holding back from recruiting new workers or replacing people when they move on.”
Alice Haine, personal finance analyst at wealth manager Bestinvest by Evelyn Partners, said: “UK pay growth eased back in the three months to April as businesses grappled with the full force of Chancellor Rachel Reeve’s National Insurance rate hike for employers and the minimum wage increase at the start of that month. The jobs market showed signs of strain as the changes, first announced by the Chancellor at her maiden Budget last October, went live.”
Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, said: “These figures suggest that the UK’s jobs market took a damaging hit from ‘Awful April’, with the tough reality of sharply rising National Insurance and National Living Wage costs pushing more employers to cut staff.
“This decline in pay growth should gather pace over the summer with weaker economic conditions and elevated employment costs likely to accelerate the downward pressure on wages, aided by the longstanding problems with poor productivity.
“The UK’s labour market is in a painful period with eye-wateringly high business costs likely to mean more job losses this year, particularly if the Spending Review increases the odds of more tax hikes in the Autumn Budget.”
Jane Gratton, deputy director for public policy at the British Chambers of Commerce, said: “The increase in employment costs for business appears to be starting to bite with today’s data showing a rise in unemployment. This year’s steep increases in national insurance and the national living wage have undoubtedly delivered a shock to businesses.”
Lib Dem Treasury spokesperson Daisy Cooper said: “These figures could not be a clearer signal to the Chancellor, ahead of the spending review, that the Government must change course.
“The Chancellor’s pig’s ear of a jobs tax is crushing the growth potential of our high-streets and small businesses, pushing people out of work, and ramping up the benefits bill.”