New hires fall to five-year low as UK labour market continues to soften

The number of people starting new jobs in the UK has fallen to its lowest level in five years, according to the latest labour market figures from the Office for National Statistics (ONS), adding to evidence of a gradual cooling in employment demand. The ONS said the labour market remained “broadly stable”, but several indicators pointed to weakening conditions. New recruitment fell to just under 540,000 people in April, the lowest monthly inflow since March 2021, while vacancies continued their long-running decline.

According to the ONS, the number of job vacancies dropped to 707,000 in the three months to May, down 19,000 on the previous quarter and the lowest level since the period from February to April 2021. Professional services recorded the largest decline in vacancies, with retail and hospitality also reporting notable falls.

Speaking to the BBC, ONS director of economic statistics Liz McKeown said that payroll numbers had continued to fall and that new recruits were at their lowest level in five years. She added that vacancies had continued to decline, suggesting that “firms are becoming more cautious about taking on new staff”. McKeown also noted signs that some workers were moving into self-employment.

Despite the decline in hiring activity, the headline unemployment rate edged down to 4.9 percent in the three months to April from 5.0 percent in the previous rolling quarter. The ONS estimates that around 1.76 million people were unemployed during the period.

Regular pay growth excluding bonuses remained unchanged at 3.4 percent in the three months to April. However, McKeown told the BBC that private sector wage growth was now increasing at its slowest pace for five and a half years. The figures suggest earnings are still growing slightly faster than prices, although the gap has narrowed.

The data was published ahead of the Bank of England’s latest interest rate decision, with most economists expecting policymakers to leave the base rate unchanged at 3.75 percent.

Ben Caswell, senior economist at the National Institute of Economic and Social Research, said the figures pointed to a “gradual easing in the labour market”. He said that, combined with softer inflation data and easing geopolitical tensions following developments in the Strait of Hormuz, the figures gave the Bank of England “the final green light” to keep rates on hold.

Yael Selfin, chief economist at KPMG UK, said the labour market was no longer a significant driver of inflationary pressures. She argued that weaker economic conditions were making workers less inclined to push for higher wages, reducing the risk of wage-driven inflation.

The Recruitment and Employment Confederation said employers remained cautious. Director of campaigns Shazia Ejaz said global pressures and domestic political uncertainty were making organisations hesitant to commit to permanent hiring, although temporary recruitment had proved more resilient.

The latest figures are published against a backdrop of continuing concerns about the quality of some ONS labour market statistics. The Labour Force Survey, which underpins employment and unemployment estimates, has faced criticism because of low response rates, and an independent review last year identified what it described as “deep seated” issues with the statistical system.