The UK unemployment rate fell to 4.9 percent in the three months to April, but private sector pay growth continued to weaken and vacancies dropped to their lowest level in more than five years, according to official figures released on Thursday.
Data from the Office for National Statistics (ONS) showed the unemployment rate fell by 0.3 percentage points on the previous quarter, while the employment rate remained largely unchanged at 75.0 percent. Economic inactivity among people aged 16 to 64 rose to 21.0 percent.
The figures also showed further signs of cooling in the labour market. Annual growth in regular pay excluding bonuses was 3.4 percent, while private sector pay growth slowed to 2.9 percent. Public sector pay growth stood at 5.1 percent.
Payroll employment and vacancies continue to fall
While the headline unemployment figure improved, other indicators painted a more subdued picture of the jobs market.
The number of payrolled employees fell by 138,000 over the year to April and by 53,000 between March and April alone. Early estimates for May suggest payroll employment was broadly unchanged month-on-month but remained lower than a year earlier.
Vacancies also continued to decline. The estimated number of vacancies fell by 19,000 to 707,000 in the three months to May, the lowest level recorded since February to April 2021.
The ONS said caution should be exercised when interpreting short-term movements in labour market data because of ongoing volatility in survey estimates. However, the overall direction of travel points to a labour market that is becoming less tight than it was in previous years.
Real pay growth remains modest
After accounting for inflation, wage growth remained positive but subdued.
Regular pay increased by 0.1 percent in real terms using the Consumer Prices Index including owner occupiers’ housing costs (CPIH), while total pay increased by 1.2 percent. Using the Consumer Prices Index (CPI) measure, regular pay rose by 0.3 percent in real terms and total pay by 1.3 percent.
The latest figures come as employers continue to balance cost pressures against recruitment and retention challenges. Recent labour market surveys have suggested many organisations remain cautious about hiring amid wider economic uncertainty and rising employment costs.
What it means for employers
The combination of slower wage growth, falling vacancies and declining payroll employment may ease some of the recruitment pressures that characterised the post-pandemic labour market.
However, the data does not point to a sharp deterioration in employment conditions. Employment remains broadly stable, unemployment remains below 5 percent and real wages are still growing, albeit slowly.
The claimant count increased to 1.712 million in May, providing another indication that labour market conditions are becoming more challenging for jobseekers than they were during the recent period of labour shortages.
Employers still hiring for critical skills
Lee Chant, managing director of commercial staffing at recruitment company ManpowerGroup, told HRreview that the latest figures reflected a labour market that remains cautious but is showing signs of resilience.
“The current UK job market is conflicted. On the face of it, today’s labour figures show signs of positivity. Although the market is still relatively subdued, it is increasingly resilient and there is a willingness to hire.”
He said employers continued to recruit where critical skills were needed, citing ManpowerGroup’s latest Employment Outlook Survey, which found that 37 percent of businesses planned to hire in the third quarter. He added that temporary recruitment was continuing to outperform permanent hiring as organisations sought greater flexibility.
Chant also said growing candidate availability had not solved skills shortages, arguing that many employers should reassess whether their hiring criteria and workforce planning reflect current labour market conditions.
“While conditions vary significantly by sector and region, businesses that are reassessing workforce needs and adapting hiring strategies will be best positioned to capitalise on opportunities as confidence gradually returns.”
Meanwhile, Shazia Ejaz, director of campaigns at recruitment industry body the Recruitment and Employment Confederation, said many employers were delaying hiring decisions amid geopolitical uncertainty and concerns about the wider economic outlook.
“Much of the job market is on standby mode as employers wait for clearer signals while geopolitical tensions unfold. Global pressures and domestic political uncertainty are making employers hesitant to commit to hiring although latest REC data shows temp hiring is faring better than permanent.”
Ejaz said vacancies were falling across most sectors and workforce jobs were declining in many parts of the country, creating a difficult environment for jobseekers despite broadly stable employment and unemployment levels.
“With the Gulf crisis resolution on the table, the government has an opportunity to kick off a new phase in hiring. It will take a more pragmatic approach, one that supports business confidence and seriously rethinks its guaranteed hours proposals.
“Coupled with increases in National Insurance costs, these rules risk a tipping point for hiring that could dent the resilience that UK businesses have shown in recent times.”
William Furney is a Managing Editor at Black and White Trading Ltd based in Kingston upon Hull, UK. He is a prolific author and contributor at Workplace Wellbeing Professional, with over 127 published posts covering HR, employee engagement, and workplace wellbeing topics. His writing focuses on contemporary employment issues including pension schemes, employee health, financial struggles affecting workers, and broader workplace trends.
- William Furney
- William Furney
- William Furney
- William Furney
