Employers cut the number of job vacancies in May, according to official figures that highlight the UK’s “fragile” economic outlook amid the conflict in the Middle East.
Job vacancies fell to 712,000 – almost half the level in 2022 – as employers put off hiring new staff in the three months to May, the Office for National Statistics said.
Unemployment remained at the same level as in April, at 4.9%showing the tough task ahead for Andy Burnham as he seeks to inject renewed vigour into the economy.
The new prime minister has promised to raise living standards across all regions as part of a 10-year economic plan, but the latest pay data showed private sector earnings growth dropped to 2.9% to leave the average rise in earnings, including bonuses, at 4.3%.
Economists had forecast a rise in average pay with bonuses in the three months to May of 4.5%, up from 4.4% for the three months to the end of April.
They had also expected unemployment to rise to 5% for the same period, from its rate of 4.9% in the three months to April.
The UK’s jobs market has weakened over the past two years, with unemployment rising steadily from a low point in the summer of 2022 of 3.6%.
Last year the unemployment rate peaked at 5.2% before falling back slightly during a more settled period after the autumn budget and before Donald Trump’s attack on Iran.
Suren Thiru, the chief economist at the accountancy body ICAEW, said: “These figures point to a fragile labour market, with soaring employment taxes and the economic turbulence sparked by the Iran war pushing some firms to limit recruitment and cut pay awards.
“The continued fall in job vacancies is a stark warning that demand for staff is dissipating under the weight of sky-high staffing costs, more onerous regulation and heightened uncertainty.
“Jobseekers will probably face more strain over the summer, with unemployment likely to edge noticeably higher as elevated cost pressures and weakening demand increasingly inhibits hiring – especially if uncertainty over future tax policy persists.”
Economists said the fall in private sector pay growth would ease pressure on the Bank of England to raise interest rates to calm inflation.
Several Bank of England officials have expressed concern about pay remaining stubbornly high, adding to the costs of production and putting pressure on inflation.