The UK jobs market remains stable despite rising pessimism among businesses, according to recent surveys. The Bank of England’s Decision-Maker Panel survey indicates that wage growth will likely fall below 4% in the coming months. While redundancy levels are currently low, concerns loom over potential increases ahead of anticipated tax hikes in the spring. The key question facing the UK is how the job market will react to upcoming tax changes and adjustments to the National Living Wage in the second quarter.
Recent surveys point to a growing negativity in hiring sentiment, with increasing discussions around redundancies. Companies are navigating the dual impact of tax increases and a near-7% rise in the National Living Wage. In sectors like retail and hospitality, vacancy rates have fallen below 2019 levels. Nonetheless, wage growth continues at a rate of around 6%, even amidst these challenging economic conditions.
Payroll data highlights that wage growth is particularly strong for those at the 25th percentile of the income spectrum. The International Labour Organization's Unemployment Change metric remained steady at 4.4% for the three months ending in December. Looking ahead, the unemployment rate is projected to decrease by 1% across 2024, excluding sectors heavily influenced by government activity.
Despite these challenges, the UK jobs market is not in complete freefall. Vacancy rates in consumer services remain below pre-pandemic levels, indicating some weakness in the job market. However, early forecasts suggest that headline inflation held steady at 1.8% compared to January of last year, providing some economic stability.
Bank of England policymaker Catherine Mann recently commented on "non-linear" declines in employment, explaining her support for a significant rate cut this month. Her remarks reflect ongoing uncertainties about future employment trends and economic policy responses.