The UK labor market is witnessing a significant downturn, with the latest employment report revealing a loss of 109,000 jobs in May alone. This shocking trend has raised fears over the economic approach of Chancellor Rachel Reeves’ incoming Labour government. Some are most concerned about its aggressive tax strategies. The Office for National Statistics (ONS) reported that a total of 276,000 jobs have been lost since Reeves first introduced her budget, further emphasizing the connection between deteriorating economic figures and governmental decisions.
The recently increased minimum wage, which rose by 6.7% in April, aims to support workers but has placed additional financial burdens on companies. Sixty million less payroll income The level of people on payrolls is plummeting. Job vacancies have now fallen for the 35th quarter in a row. ONS data released today shows an alarming uptick in the number claiming unemployment benefits, marking a change in the otherwise booming labor market.
Employment Report Highlights Job Losses
The latest ONS employment report paints a very alarming picture that brings into focus the increasingly hostile environment that UK workers are experiencing. This past May, the country recorded its biggest employment loss in five years. This shocking drop-off led to a national panic among the economic and policy establishment.
“UK employment plunged by the most in five years and wage growth slowed more than forecast, as the labor market deteriorated after Chancellor of the Exchequer Rachel Reeves ramped up the cost of hiring,” – Financial Post
All told, since Chancellor Reeves’ inaugural budget, the UK has haemorrhaged 276,000 jobs. This decline has led to heightened anxiety within various sectors as employers grapple with increasing operational costs amid falling demand for labor.
Liz McKeown, director of economic statistics for ONS, called the find an alarming trend. Industry surveys confirm that firms remain extremely reluctant to hire new workers or replace those who leave.
“Feedback from our vacancies survey suggests some firms may be holding back from recruiting new workers or replacing people when they move on.” – Liz McKeown
This cautious approach from employers reveals a broader trend of uncertainty about the future of job security within the UK labor market.
Rising Costs and Pressure on Employers
The recent increase in minimum wage, while beneficial for workers, has intensified pressure on businesses already facing rising operational costs. Employers have been obligated to absorb significant increases in social security contributions since April, equating to around 0.6% of GDP.
Yael Selfin, chief economist at KPMG UK, expressed concern that businesses might respond to these rising costs by reducing their workforce or slowing hiring activities.
“It is likely that businesses will look to offset some of the rise in employment costs through a combination of reducing headcount and slowing hiring activity,” – Yael Selfin
Further exacerbating this uncertainty, Petra Tagg of Manpower UK pointed to the continuing nervousness among employers about the state of the economy.
“There is so much nervousness with employers right now.” – Petra Tagg
This atmosphere of apprehension is further fueled by expectations of upcoming economic challenges as businesses brace for additional burdens from the Labour Party’s proposed £5 billion unemployment bill.
Economic Outlook and Future Implications
Our new economic forecast paints a pretty ambiguous picture. With inflation still well above the Fed’s 2 percent target and other indicators of labor demand still cooling, Ruth Gregory from Capital Economics on the outlook for the labor market. Yet as much as she stressed that it isn’t falling apart, there are unmistakable indicators of decay.
“The jobs market is not collapsing… But most indicators show labour demand is clearly weakening,” – Ruth Gregory
With headline inflation remaining stubbornly high and expectations surrounding price stability becoming uncertain, markets are predicting that the Bank of England (BoE) may implement two rate cuts before the end of the year, with one anticipated as early as August. Economists Ana Andrade and Dan Hanson from Bloomberg Economics noted that ongoing weakness in the jobs market could lead to sequential cuts in interest rates during the latter half of the year.
As Chancellor Rachel Reeves prepares to present new budgetary arbitrages amid these challenging conditions, there are voices within her party calling for a change of approach to better support both workers and businesses in navigating these turbulent times.