The UK jobs market has turned upside down. In June, the number of payrolled employees dropped by an equally shocking 109,000. This downturn is part of a broader trend, as the jobs market has experienced a decline in employee numbers for nine out of the past ten months. Prior to this grim chapter, the labor market enjoyed a remarkable 44 straight months of sustainable expansion. At the same time, this rapid turnaround represents a stunning turnaround in the direction of employment trends.
That short-term unravelling of the UK jobs market seems to be speeding up. Since December, the “ex-government” measure of employee numbers has decreased by 1.2%, pointing to troubling signs in overall employment health. This unprecedented contraction has sparked widespread fear and uncertainty among economists and analysts alike about the expected path of the labour market.
Besides this steep decline in the employment rate, wage growth in the private sector has further indicated a worsening trend. It fell to 5.1% from 5.9% over the past two months, suggesting that employers are facing challenges in maintaining competitive wage levels amid a cooling economy. The Bank of England’s Decision Maker Panel reveals further anxiety among firms, with expectations for wage growth dropping to 3.5% in the coming months.
Losses in May were 109,000 less payrolled employees in the economy. That would be the biggest monthly drop since the data series began in 2014, excluding during the Covid-19 pandemic. Such a drastic decline raises alarms about the resilience of the labour market and its capacity to recover from this downturn.
Furthermore, job openings have started to decline much faster and are now well below pre-Covid levels. This decline in vacancies further indicates a lack of confidence among employers in expanding their workforce during these uncertain times. Despite these concerning trends, redundancy notices submitted to the government have not increased, even amidst a rise in employers’ national insurance contributions effective from April.
The restatement of payroll data provides some context to this shaky state of affairs. Initially reported as a loss of 78,000 payrolled employees in March, that figure has now been adjusted to reflect a decline of only 35,000. This amendment serves to remind us all of the volatility and potential misinterpretation of data that can happen during economic downturns.
Officials are closely monitoring wage growth, which has remained stubbornly high despite the evident cooling in hiring conditions over recent years. This stagnation could pose challenges for monetary policy decisions moving forward, as high wage growth typically signals a robust economy.
Moreover, analysts and labor-market experts are adamantly monitoring these deteriorating trends in the job market. Local observers generally expect that the next rate cut will take place in August. They predict that this could be followed by further quarterly cuts extending into November and potentially as far as 2026. These anticipated cuts highlight a growing concern about economic stability and the need for monetary intervention to stimulate recovery.