UK Labour Market Continues to Cool, Says ONS
The UK labour market is continuing to show signs of cooling, according to the Office for National Statistics (ONS). The ONS’s director of economic statistics, Liz McKeown, said: "The broader picture continues to be of the labour market cooling."
The latest figures from the ONS show that the unemployment rate increased to 4.5% in the January to March period, up from the previous figure of 4.4%. However, the ONS has cautioned that its unemployment figures should be treated with caution due to low response rates to the survey on which they are based.
In addition to the rise in unemployment, the ONS also reported that the number of employees on companies’ payrolls fell by 47,000 in March and by an estimated 33,000 in April. Job vacancy numbers also fell, with the estimated number of vacancies in the UK decreasing by 42,000 on the quarter to 761,000 in February to April 2025.
Some firms had warned that changes to tax and the minimum wage that came into effect in April could affect recruitment. A separate survey released on Monday had painted a gloomy picture of the labour market, suggesting that the number of employers expecting to hire more staff in the next three months had fallen to a record low, excluding the pandemic.
Ruth Gregory, deputy chief UK economist at Capital Economics, said: "The further softening in employment in April suggests businesses continued to respond to the rise in business taxes and the minimum wage by reducing headcount." While wage growth had slowed, she added that it still remained relatively strong, meaning the Bank of England will remain cautious over future interest rate cuts.
The Bank of England cut interest rates last week and indicated that more cuts could follow, although governor Andrew Bailey said it would be moving "gradually and carefully". The Bank keeps a close eye on wage growth as the concern is that if earnings grow quickly, firms will seek to push up prices, and this will put up the rate of inflation. Ms Gregory said: "Sticky wage growth may mean the Bank remains uneasy about inflationary pressures in the near term. As a result, the ‘gradual’ interest rate cutting path will remain in the balancing act."
Luke Bartholomew, deputy chief economist at fund manager Aberdeen, agreed that the Bank was likely to stick to its current policy on rate cuts. He said: "While the labour market continues to slow, and there is some evidence of the impact of the increase in National Insurance… there is nothing to suggest it immediately fell off a cliff in response to the shock."
The ONS figures also showed that wage growth had slowed, but remained relatively strong. This is likely to be a concern for the Bank of England, which is keen to keep inflation under control. According to the ONS, the labour market is continuing to cool, and this is likely to have implications for the wider economy.
The UK economy has been facing challenges in recent months, including a slowdown in growth and a rise in inflation. The labour market is a key indicator of the health of the economy, and the latest figures from the ONS suggest that it is continuing to slow. As the ONS’s Liz McKeown said: "The broader picture continues to be of the labour market cooling."
This article is based on the reporting from BBC News.
