Cooling in jobs market reduces pressure on Bank of England to raise interest rates

Growing signs of a cooling jobs market today eased the pressure on the Bank of England to raise interest rates once again next month.

The latest data from the Office for National Statistics (ONS) came on the day that Vodafone revealed that it will shed 11,000 jobs over the next three year, many of them in the UK.

Most of the indicators from the ONS suggest that the acute labour shortages that have blighted the UK economy for years — caused by a combination of the impacts of Covid and Brexit — could be past the worst.

The unemployment rate for the January to March quarter rose 0.1% to 3.9%, still low by historical standards.

There was also a 136,000 fall in the number of payrolled employees in April, suggesting that the jobs shake-out from the cost of living crisis may be gathering pace. It was the first fall since February 2021.

Vacancies were also down for the 10th month on the trot falling by 55,000 to 1.083 million.

The inactivity rate dipped 0.4 of a percentage point to 21% but the number of people unable to work because of long-term sickness hit an all-time high of 2.55 million. However, wage growth remains strong with average regular pay surging at 6.7%, and 7% in the private sector.

conomists said that while the data painted a mixed picture, employers are now more likely to be in firing rather than hiring mode. However, markets are still pricing in a 68% chance of another quarter-point rate hike in June.

Sarah Coles, head of personal finance at fund managers Hargreaves Lansdown, said: “The one constant throughout the past few years of turmoil has been that overall the job market has held up. It has persuaded us to keep spending, and buying property, because despite all the financial stress, an awful lot of people have felt that their job is secure.

“Unfortunately, this set of figures sees some weakness creep into the data.”

Philip Shaw, chief economist at banking group Investec said: “The signs that conditions in the labour market are cooling appear more convincing this month.”