The number of payroll workers for UK companies fell at the fastest pace due to the height of the Covid pandemic amid global uncertainty and warnings that Rachel Reeves’ budget measures could lead to unemployment.
National Bureau of Statistics figures show that after a revised decline of 8,000 in February, the number of people employed in at least one job paid through wages in March fell by 78,000.
Reflecting the slowdown in the job market, the latest snapshot showed that annual wage growth rose slightly in three months in February, staying at historically high levels. Regular pay, excluding bonuses, rose from 5.8% in the previous three months to 5.9% from 5.8% in the end of January. This was slightly below the forecast of 6% of urban economists.
Despite a decline in the number of workers in the company’s payroll, the ONS said the official unemployment rate has not changed at 4.4% for the three months leading up to February.
However, agencies have warned that the quality of UK official job market statistics is problematic due to low response rates to major labor force surveys. Experts argue that this leaves policymakers with “blind flights” and that decisions are being made based on flawed data.
Business leaders had warned that the tax rise announced by Reeves in their October budget would force them to cut jobs and reduce the bigger wage growth. A survey earlier this year suggested that companies had been cutting jobs at the sharpest rate since the 2008 financial crisis except for the community pandemic.
Earlier this month, the government moved up £25 billion in employers’ national insurance contributions, affecting about 1 million businesses, and surged a 6.7% increase in the national living wage.
Companies in the low-wage sectors, such as hospitality, leisure and retail, are usually warning about the biggest potential hits. The Bank of England warned last month that employers were frozen in employment plans.
The latest figures in HMRC salary data, which provide early estimates before the official workforce survey, show that the biggest change in the month is from health and social work, with an increase in employee numbers of 70,000. However, this is more than offset by other sectors, resulting in a 92,000 reduction in accommodation and foodservice activities.
The UK’s vacancies fell 26,000 in three months, marching to stand at 781,000, below pre-pandemic pandemic levels, which are the first time since 2021.
However, economists said the photo is resilient amidst high levels of wage growth and relatively low levels of unemployment, despite signs of a job market cooling.
After the newsletter promotion
The UK economy is functioning stronger than expected, with growth of 0.5% in February exceeding analysts’ forecasts as businesses and consumers continued to spend despite increasing global uncertainty.
“Even though employment continues to cool down, it hasn’t collapsed as the disastrous warnings from some business research suggested,” said Ashley Webb, UK economist at Consulting Capital Economics.
“However, if a more uncertain background from recent US tariffs quickly drags a big deal of corporate employment intentions, wage growth could begin to decline more significantly.”
