- Unemployment rises to 4.5% in the three months to March 2025, up from 4.4%
- Pay growth slows to 5.6%, down from 5.7% in the three months to February 2025 but still comfortably above inflation
- Vacancy numbers fall again – now 34,000 below pre-Covid levels
Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK jobs figures:
“Ever since last year’s Budget shocked employers with a chunky increase to national insurance, businesses have been warning that increased labour costs would impact their ability to hire and retain staff.
“The latest figures from the Office for National Statistics appear to show those warnings had merit, though the organisation continues to warn about the validity of these figures due to low engagement. Unemployment is up, vacancy numbers have dwindled to significantly below where they were before the pandemic and wage growth has slowed.
“As inflation has cooled the pressure on businesses to deliver substantial pay increases in order to keep skilled staff happy has fallen back, and as the labour market continues to loosen this year’s pay deals are likely to look very different from those given over the past couple of years. Although wage growth is still currently beating inflation by 2.6%.
“A figure that perhaps gives us greater insight into what is going on in boardrooms and back offices around the country is the number of payroll employees, with early estimates showing an annual fall of 0.3% in April, or 106,000 less compared with the same time a year ago, and 33,000 fewer than the month before.
“It’s probably no surprise that the labour-intensive food and accommodation sectors have been the hardest hit. Consumers have been nervous of spending, even if the sunshine did tempt them onto the high street and into bars and restaurants over the past few weeks.
“Donald Trump’s tariff flip-flop has also dented both consumer and business confidence. Although deals are finally being struck, even if in some cases they are of a temporary nature.
“The big question is how many employers acted proactively, cutting back on vacancies and employee numbers ahead of April’s increases, and how many have still to make adjustments once they see the impact of increased labour costs in black and white.
“UK growth has surprised on the upside, consumer spending has remained resilient and the sun has cast a rather lovely glow over everything, but it’s impossible not to look at the horizon and wonder if dark clouds are already gathering ready to douse the economy with a great British storm.”
