UK employers have reduced annual pay increases and scaled back hiring as the economic slowdown affects the jobs market.
Office for National Statistics (ONS) data for the three months to June shows unemployment increased, though the unemployment rate remained 4.7%, the highest in four years. Average earnings growth, including bonuses, fell from 5% to 4.6%. Pay growth remained at 5% excluding one-off awards, indicating reduced incentive payments.
Vacancies dropped by 44,000, more than 5% from the previous quarter, marking the 37th consecutive decline. At 718,000, vacancies are now well below pre-pandemic levels. The finance and business services sector, which typically pays higher bonuses, recorded the lowest annual regular pay growth at 3.1%.
The Bank of England has highlighted signs of a cooling labour market and easing pay pressures. However, last week’s quarter-point interest rate cut to 4% is unlikely to be followed by immediate further reductions. Markets expected unemployment and pay growth to ease in line with the ONS figures.
Surveys indicate businesses are holding back on recruitment amid rising employment costs and economic uncertainty. The Chartered Institute of Personnel and Development reported record-low hiring intentions, with young jobseekers hit hardest. Only 57% of private sector employers plan to recruit in the next three months, down from 65% last autumn.
Private sector pay grew 4.8% in the year to June, equivalent to a 0.7% rise after inflation. Public sector pay rose 5.7%, the ONS said.
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