UK Jobs Market Edges Toward Stabilization Ahead of Reeves Budget

UK Jobs Market Edges Toward Stabilization Ahead of Reeves Budget

by

in

Britain’s employment market is beginning to show signs of stabilization following a recent wave of job losses attributed to tax increases imposed by Chancellor Rachel Reeves earlier this year. As the country prepares for Reeves’ upcoming budget announcement on November 26, the latest statistics from the Office for National Statistics (ONS) revealed a slight rise in the unemployment rate to 4.8% for the three months leading to August, up from 4.7% in July. This increase was not anticipated by City economists, who had predicted stability.

Additionally, figures from HMRC indicated a decline of 10,000 in the number of workers on company payrolls in September. However, ONS officials noted a stabilizing trend in the job market, as earlier steep declines seem to be leveling out. ONS Director of Economic Statistics, Liz McKeown, stated, “After a long period of weak hiring activity, there are signs that the falls we have seen in both payroll numbers and vacancies are now levelling off.”

Interestingly, August’s payroll data was revised from an initial decline of 8,000 to an increase of 10,000, suggesting relative stability in a large workforce of over 30 million. Job vacancies fell by 9,000, reaching 717,000 in the three months up to September, marking one of the smallest declines since mid-2022. Meanwhile, the annual growth rate for regular average weekly earnings, excluding bonuses, slightly decreased from 4.8% to 4.7%, aligning with forecasts.

Despite a slowing wage growth rate in the private sector, public sector pay increased, likely due to early pay rises being implemented. The public sector saw an annual growth of 6%, while the private sector managed 4.4%. Total pay growth, which includes bonuses, unexpectedly rose from a revised 4.8% to 5%, indicating resilience in personal earnings despite a cooling job market.

Martin Beck, chief economist at WPI Strategy, commented on the impact of rising employer national insurance contributions and the increased national living wage on hiring practices. He noted that while these measures have negatively affected hiring, the recent summer figures suggest the most severe consequences may be fading. Nonetheless, he characterized the job market as being more fragile than it has been in recent years.

Meanwhile, the ONS has faced criticism over its labour force survey methodology, which has been hindered by diminishing response rates. This raises concerns about the reliability of data guiding policymakers in a fluctuating economic environment.

As the chancellor plans potential tax hikes in the upcoming budget, business leaders are urging Reeves to reconsider this course of action, warning that a weaker economic outlook could exacerbate challenges. Alex Hall-Chen from the Institute of Directors emphasized the need for a shift in policy to invigorate growth and support job creation.

Pat McFadden, the Secretary of State for Work and Pensions, acknowledged that while there are record levels of employment, many individuals remain excluded from job opportunities and the associated benefits, reiterating the importance of accessible training and employment.

Strong wage growth poses further complications for the Bank of England, contributing to inflationary pressures and complicating decisions around potential interest rate cuts following four reductions in the past year. Nevertheless, a pronounced downturn in the jobs market could indicate a deeper economic decline and possibly warrant quicker interest rate cuts.

As the situation develops, economists remain cautious yet hopeful, emphasizing the potential for recovery in the labor market and the importance of thoughtful fiscal policy to support continued job growth and economic stability.

Popular Categories


Search the website