UK Job Vacancies Fall to Five-Year Low as Hiring Slows

The number of job vacancies in the UK has fallen to its lowest level in more than five years, with smaller businesses reducing recruitment amid higher labour and operating costs, according to official figures.

Vacancies fell to 707,000 between May and July, according to the Office for National Statistics (ONS). The statistics agency said smaller firms had cited higher labour and operating costs as factors behind their decision to scale back hiring.

Energy costs have increased since the war in Iran began, while businesses have also faced higher employment costs following increases in National Insurance and the minimum wage.

Although overall earnings growth picked up slightly, private-sector wage growth slowed to its weakest rate in almost six years.

Regular earnings, which exclude bonuses, increased by 3.5% annually in the three months to June, the ONS reported. Public-sector pay growth reached 6.1%, partly reflecting the timing of the latest NHS pay awards. In the private sector, earnings growth fell to 2.8%.

"The UK labour market remains stuck in a low-churn limbo, with employers reluctant to hire, fire or offer bigger pay rises as they grapple with rising costs, intensifying global headwinds and heightened policy uncertainty," said Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales.

"The persistent slide in vacancies is a red flag for the jobs market, suggesting labour demand is shrinking amid soaring employment and energy costs, while greater automation is also squeezing some entry-level roles."

Unemployment Remains at 4.9%

The ONS described the labour market as "little changed overall", with the unemployment rate remaining at 4.9%.

The figures showed that the number of payrolled employees fell by 13,000 in June. Early estimates indicate that payroll employment declined by another 13,000 in July.

Responding to the latest figures, Secretary of State for Work and Pensions Pat McFadden said it was "encouraging to see signs of progress".

"We've already put in places reforms to get Britain working again," he added, citing changes to Universal Credit "to remove barriers that held people back from employment" and spending on support to help people with health conditions and disabilities move into work.

Shadow chancellor Mel Stride took a different view, saying:

"Job vacancies are at their lowest in over five years, and unemployment remains high. Labour are the party of welfare, not work."

The Conservatives also announced proposals on Tuesday aimed at making it easier for young people to take up summer jobs. The party said the proposals would give young workers greater flexibility over breaks and shift patterns, while simplifying restrictions on evening work at weekends and outside term-time.

Young Jobseekers Face Difficult Market

For some young people, the weaker hiring environment is making the search for employment particularly challenging.

Aaron Diangienda told BBC Newsbeat that he has been searching for a job for more than a year.

"I've been trying my best, just making sure that I am finding the correct stuff to suit me and keeping on going with [the job hunt]", he says.

The 19-year-old has decided to return to college in September to study for a Level 3 sport diploma, with the aim of improving his employment prospects.

Jasmine Walker has also been applying widely for work.

The 24-year-old has been searching for marketing positions since graduating from university in July and estimates that she has applied for more than 300 jobs.

"It's a bit frustrating because you're researching and practising how to make your CV and applications pristine, and yet you still can't get anywhere with that," says Walker.

Business Confidence Under Pressure

The weaker recruitment environment comes as businesses face additional cost pressures and uncertainty over employment policy.

Government analysis released last week estimated that businesses could face costs of up to £2.9bn a year under a planned crackdown on zero-hours contracts. The changes would reduce the number of hours staff can work before employers are required to offer guaranteed working time.

The British Chambers of Commerce (BCC) said business confidence had fallen to a post-pandemic low and warned that measures such as changes to zero-hours contracts meant many companies "will be reassessing their recruitment plans".

"Much more must now be done to bolster business confidence and unlock hiring by tackling cost pressures on firms," said Patrick Milnes from the BCC.

The TUC, however, argued that "exploitative" zero-hours contracts had become "endemic" in the UK and called for the government to end them.

"We need to get young people into work – but it isn't good enough to push them from unemployment into rampant insecurity... they deserve good, secure employment like anyone else," said TUC general secretary Paul Nowak.

Wage Growth and Bank of England Outlook

Analysts said the latest ONS figures showed limited evidence that wage growth was creating inflationary pressure. As a result, they considered it unlikely that the Bank of England would raise interest rates at its September meeting.

"With underlying wage pressures remaining contained, there is little reason for the Bank of England to shift course, and we expect rates to remain on hold for the remainder of the year," said Yael Selfin, chief economist at KPMG.

Figures released last week showed that the UK economy grew by 0.4% between April and June. The ONS described the performance as "relatively robust", although analysts expect economic growth to slow during the second half of the year.

It also emerged last week that internal forecasts presented to the new prime minister and chancellor suggested UK growth could fall to as low as 0.3% in 2027 if the war in Iran continues to disrupt shipping through the Strait of Hormuz.

Key Takeaways

• UK job vacancies fell to 707,000 between May and July, their lowest level in more than five years.
• The UK unemployment rate remained at 4.9%, while payrolled employment fell by 13,000 in both June and the preliminary July estimate.
• Private-sector regular earnings growth slowed to 2.8%, while public-sector pay growth reached 6.1%.
• Businesses are facing higher labour and operating costs, with concerns over recruitment and proposed changes to zero-hours contracts.
• Analysts said contained wage pressures made a September Bank of England rate increase unlikely.

Conclusion

The latest figures point to a cautious UK labour market, with vacancies continuing to decline while businesses contend with higher costs and policy uncertainty. The weaker recruitment environment is particularly challenging for young jobseekers, while slower private-sector wage growth is also shaping expectations for the Bank of England's interest-rate outlook.

Reference

Source: BBC News