The UK’s job market has been buoyant since the economy began to recover from the Covid pandemic.
However, this trend may be starting to take a turn, as experts have warned.
In the three months leading up to July this year, the UK’s unemployment rate fell to 3.6%. This is the lowest rate seen since 1974. Despite these figures, the employment rate as well as number of available vacancies experienced a fall.
Further, the rises in regular pay are failing to keep up with rising living costs.
James Reed, from one of the UK’s top specialist recruitment companies, Reed, told the BBC that the “jobs boom that began six months after the pandemic is probably coming to an end now.”
Reed added that there are still “very large numbers of vacancies and people are still advertising a lot of jobs, and that’s why we’ve seen unemployment continue to go down.”
A strong contributor to the fall in the unemployment rate is the rise in the number of people who are no longer looking for work, and are thus no longer included in these figures. According to the Office for National Statistics (ONS), the inactivity rate has risen up to 21.7%, the highest since 2017.
There was a new jump in the number of people who said that they were not looking for jobs due to studying or having a long-term health condition.
According to the Research Director at the Resolution Foundation, Gregory Thwaites, who told the Financial Times, instead of the “cost of living crisis tempting people back into work, more people are exiting the jobs market altogether.”
Further, the value of regular pay fell by 2.8%. The ONS additionally found a continued gap between private and public sector pay growth. While the average regular pay growth for the private sector was 6% between May to July, this stood at 2% for the same period for the public sector.
A number of other measures have als suggested that the job market is soon to experience a turn. For instance, the number of job vacancies fell by its largest amount in the last two years, down from 34,000 between June and August. The current employment rate also slipped down to 75.4%.
EY’s Item Club Chief Economic Adviser, Martin Beck, told the BBC that this drop suggested that the “weak economy is starting to have an adverse effect on the jobs market.”
Further, businesses have warned that the squeezed labour market in the UK is having a detrimental effect. Particularly for labour-demanding jobs, businesses are struggling to find employees to find their job vacancies. Not only is this holding back their growth, but this is also contributing towards rising inflation.
The Director of the British Chambers of Commerce, Jane Gratton further told the BBC that during this “period of increasing inflation, and a stagnant economy, we cannot afford to let recruitment problems further dampen growth.”Further, there have been concerns that soaring energy prices may force companies to make staff cuts and to help their business save money. While a visible impact on the jobs market is expected to be seen over the next few months, this is likely to have been eased slightly by the UK Government’s newly announced energy price cap.