UK jobs market cooling as unemployment rises, but wages still strong – business live | Business

Today’s jobs data is “very disappointing again”, warns Tony Wilson, Director at the Institute for Employment Studies.

Wilson points out that there are now 900,000 more people out of work than before the pandemic began, with virtually all of this due to higher economic inactivity.

He says:

There appear to be three key reasons for this: fewer older people coming back to work, more young people in education or out of work, and more people off with long-term health conditions across all ages.

Last month, Rishi Sunak claimed Britain is suffering from a “sicknote culture”, and announced a trial under which “work and health professionals” rather than GPs would issue fit notes.

However, UK workers take fewer sick days than those in France, Germany or the US.

Wilson explains:

However for all the talk about this being driven by a ‘sicknote culture’, the reality is that the UK has among the lowest rates of sickness absence in the world, while our analysis shows that the growth in ill health is being driven primarily by fewer people with health conditions coming back to work rather than more people leaving.

So we need to do far more and better to make our employment services more accessible, inclusive and supportive, rather than just threatening to change the rules or cut people’s benefits.”

The TUC are also concerned that the jobs market is weakening.

TUC General Secretary Paul Nowak says:

“The Tories are presiding over a rapidly deteriorating jobs market.

“Unemployment and economic inactivity are shooting up. Over a million people are trapped on zero-hours contracts. And real wages are still worth less than in 2008.

“Forget ‘green shoots’ – everywhere you look the Conservatives are failing working people.

“Our country is crying out for a proper economic plan for jobs and growth to make sure household incomes can recover and everyone is secure at work.

“And our NHS desperately needs investment to get waiting lists back down. When people can access treatment faster, they will return to work sooner.”

Alison McGovern MP, Labour’s acting shadow Work and Pensions Secretary, says today’s jobs report shows things are “just getting worse” under the current government.

McGovern also blames high NHS waiting lists for the jump in people who are now economically inactive, explaining:

“The morning after Rishi Sunak told us his plan was working, these damning new figures prove that things are just getting worse: employment down, economic inactivity up and unemployment rising.

“It’s no wonder there are now a record number of people locked out of work due to long-term sickness, given NHS waiting lists are spiralling and the Tories have pushed our NHS to its knees.

“It’s Labour who have the plan to get Britain working by driving down waiting lists, reforming job centres, making work pay and supporting people into good jobs across every part of the country. Change with Labour can’t come soon enough.”

The UK’s weakening labour market is a “harbinger of interest rate cuts”, says Yael Selfin, chief economist at KPMG UK.

Selfin says other indicators have also shown a “gradual deterioration in the labour market”.

That could encourage the Bank of England to consider cutting interest rates – if it also sees signs that pay rises are slowing.

Selfin explains:

“There were signs of some increased momentum in regular pay, with wage growth rising across a range of sectors in March. Consumer-facing services such as hospitality, where vacancies remain high and workers are more likely to benefit from the rise in the National Living Wage, could see continued pressure this summer. However, we expect overall headline wage growth to slow in the coming months on the back of weaker hiring activity.

“Next month will be key in terms of pay data as it will provide initial evidence of the impact of April’s National Living Wage increase. If it comes in line with our expectations of only a modest boost, and sufficient to keep annual pay growth on a downward trajectory, this could ignite more dovish sentiment on the MPC ahead of their June vote.”

Chancellor of the Exchequer Jeremy Hunt is cheered that real wages are continuing to rise, saying:

“This is the 10th month in a row that wages have risen faster than inflation which will help with the cost of living pressures on families.

And while we are dealing with some challenges in our labour supply, including pandemic impacts, as our reforms on childcare, pensions tax reform and welfare come online I am confident we will start to increase the number of people in work.”

Secretary of State for Work and Pensions, Mel Stride MP, says:

“We are leaving no stone unturned to get people back to work, rolling out the most radical changes to welfare in a generation including reforming how we assess someone’s capability to work, overhauling the fit note process and helping over a million people through our £2.5bn Back to Work Plan.

We’ll always be on the side of hardworking families and with real wages still rising, alongside tax cuts and the huge boost to the National Living Wage, we are incentivising work over welfare as we build a strong economy where everyone has a brighter future.”

The ONS has also published some neat regional data, showing the labour market across the UK.

Here’s the details:

• The highest employment rate estimate in the UK was in the South East (78.6%) and the lowest was in the North East (69.1%), for the three months ending March 2024.

• Northern Ireland saw the largest increase in the employment rate compared with the same period the previous year, increasing by 1.0 percentage point, with the North East seeing the largest decrease of 3.5 percentage points.

• The highest unemployment rate estimate in the UK was in the East Midlands (5.6%) and the lowest was in Northern Ireland (2.1%), for the three months ending March 2024.

• The North West had the largest increase in the unemployment rate compared with the same period the previous year, increasing by 2.0 percentage points, with Wales seeing the largest decrease of 1.2 percentage points.

• The highest economic inactivity rate estimate in the UK was in Wales (28.0%) and the lowest was in the South East (18.2%), for the three months ending March 2024.

• The North East saw the largest increase in the economic inactivity rate compared with the same period the previous year, up 3.9 percentage points, with the Northern Ireland seeing the largest decrease of 0.8 percentage points.

The number of people on UK company payrolls also appears to have fallen last month.

The ONS estimates that payrolled employment decreased by 85,000 employees in April when compared with March.

However, the statistics office says we should treat this as a provisional estimate. And indeed, March’s payroll data has been revised higher this morning – from a decrease of 67,000 to a decrease of 5,000.

On an annual basis, there are 129,000 more employees on payrolls than in April 2023; this is driven by a 170,000 increase in employees in the health and social work sector.

Today’s labour market report shows some signs tht the jobs market is cooling, say ONS director of economic statistics Liz McKeown:

“We continue to see tentative signs that the jobs market is cooling, with both employment from our household survey and the number of workers on payroll showing falls in the latest periods.

“At the same time the steady decline in the number of job vacancies has continued for a twenty-second consecutive month, although numbers remain above pre-pandemic levels. With unemployment also increasing, the number of unemployed people per vacancy has continued to rise, approaching levels seen before the onset of COVID-19.

“Earnings growth in cash terms remains high, with the recent falls in the rate now levelling off while, with inflation falling, real pay growth remains at its highest level in well over two years.”

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Britain’s unemployment rate has risen as companies cut back on hiring, and more people drop out of the labour market, often due to ill health.

The latest UK labour market statistics, just released this morning, show that the jobless rate has risen to 4.3% in the first quarter of this year, up from 4.2% a month ago and 3.8% in the previous quarter.

That’s the highest unemployment rate in nearly a year, since March-May 2023.

Another 166,000 people become unemployed in the quarter, taking the total out of work and looking for a job to 1.486m.

The number of people in employment dropped by 178,000 – another signal that the labour market is cooling – taking the total in work to just below 33 million.

Vacancies fell too: down by 26,000 in the three months to April, to 898,000.

In another worrying sign, the UK’s economic inactivity rate jumped to 22.1% in January to March, up from 21.9% in the final three months of 2023. That highlights the rise in people leaving the workforce – perhaps for illness, or due to caring responsibilities.

But pay growth remained strong – which may disappoint the Bank of England as it looks for signs that inflationary pressures are easing.

Regular earnings (excluding bonuses) rose by 6.0% in the last year, while total pay (including bonuses) rose 5.7% – with both readings unchanged compared with last month.

This means that real wages continue to grow, with earnings rising faster than CPI inflation.

The ONS says:

Using CPI real earnings, in January to March 2024, total pay was 2.1%. Growth was last higher in July to September 2021, when it was 3.0%.

Regular pay was 2.4%; growth was last higher in June to August 2021, when it was 3.4%.

Also coming up today

Later this morning we’ll hear from BoE chief economist Huw Pill, one of the monetary policy committee members who voted to leave interest rates on hold last week.

UK farmers are heading to Downing Street to meet PM Rishi Sunak for the second Farm to Fork summit, to discuss the challenges in the farming industry.

Global investors are bracing for the latest US Producer Price Index (PPI) data, which will show how quickly America’s manufacturers and services companies raised their prices last month.

The PPI report could reinforce, or ease, concerns that US inflation is looking sticks.

Stephen Innes, managing partner at SPI Asset Management, explains:

If this month’s PPI data doesn’t show a decline, there is potential for rates to drift higher, which could lead to a slide in stocks.

And in Miami, mining executives have gathered for the Bank of America Global Metals, Mining & Steel Conference 2024. That includes the CEOs of BHP Group and Anglo American, who are locked in a takeaover tussle after Anglo rejected BHP’s second takeover bid.

The agenda

• 7am BST: UK labour market report

• 8.30am BST: Bank of England chief economist Huw Pill speaks at the Institute of Chartered Accountants in England and Wales Regions economic summit

• 9.30am BST: UK productivity estimates for Q1 2024

• 10am BST: ZEW institute index of eurozone economic sentiment

• 11am BST: NFIB index of small business optimism

• 1.30pm BST: US PPI index of producer price inflation

• 3pm BST: Fed chair Jerome Powell speaks at the Foreign Bankers’ Association AGM in Amsterdam