UNEMPLOYMENT has fallen unexpectedly to 4.9% but experts warn “a small fall does not suddenly mean the labour market is strong again”.
The rate in the UK was at 4.9% in the three months to April, down from 5% in the previous quarter.
Annual wage growth, excluding bonuses was 3.4% in the three months to April, Office for National Statistics (ONS) figures showed on Thursday, hours before the Bank of England announces its next interest rate decision.
Average earnings, including bonuses, climbed by 4.4% in the same period after increasing by 4.4% in the quarter through March.
The estimated UK economic inactivity rate increased by 0.3% in the latest quarter, to 21%.
These figures come ahead of the Bank of England’s base rate decision at midday – it is expected to be held at 3.75%.
ONS director of economic statistics Liz McKeown said: “The labour market remained broadly stable in the latest quarter, with further softening evident in some measures.
“Payroll numbers continued to fall over this period, with new recruits at their lowest level in five years. However, overall employment was little changed, with some signs of workers moving into self-employment.”
Unemployment may have edged down because employers are cautious about losing staff
Lukas Kaminskis, CEO of EdTech platform Turing College, said it’s more important than ever to build new skills in the workplace.
He added: “A fall in unemployment is encouraging, although the labour market remains difficult to read. The latest figures suggest employers are still holding onto staff and hiring where they need to, despite wider economic uncertainty. That resilience may reflect continued demand in parts of the economy, as well as caution from businesses that know good people can be hard to replace.
“What is clear is that the labour market has not weakened sharply. Wage growth remains positive, which suggests competition for people with the right skills is still there, even if hiring conditions are becoming more balanced. For employers, that means the challenge is not just finding talent, but keeping and developing the people they already have.”
Kate Underwood, Founder at Southampton-based Kate Underwood HR and Training, said the figures are due to fewer vacancies rather than positive employment news.
She added: “Let’s not throw a party over a drop in unemployment from 5% to 4.9%, it’s only a very small fall. It’s not down because for any positive reasons, rather people are holding onto the roles they’ve got because the alternative looks terrifying.
“Small businesses are not hiring, they are instead holding onto staff and that means fewer vacancies across the board which flatters the figures. What small businesses desperately need a Bank of England rate cut today so they can actually afford to grow.”
The labour market isn’t booming, it’s just deteriorating more slowly than some expected
Colette Mason, AI Ethics Consultant at London-based Clever Clogs AI, said employment is holding up despite the proliferation of AI.
She added: “For two years, Silicon Valley has enjoyed telling us that people are the expensive bit of the economy: slow, inconvenient, awkward and therefore ripe for replacement. And yet the latest labour market numbers rather complicate that story. Employment is broadly holding up.
“That is not the same as saying the labour market is in rude health. Vacancies, wage growth, hiring confidence and the cost of money still matter enormously. But it does suggest employers may be bumping into a rather dull but important fact: work is not simply a bundle of tasks waiting to be shovelled into a chatbot.
“This is hardly a golden age for employees, but it does puncture the prevailing boardroom idea that humans have already been neatly priced out of the system.”
Nouran Moustafa, Practice Principal & IFA at Roxton Wealth, said employers are cautious about losing staff.
She added: “I am not massively surprised. A small fall from 5% to 4.9% does not suddenly mean the labour market is strong again. It tells me the jobs market is cooling, but not falling off a cliff. Unemployment may have edged down because employers are still cautious about losing staff, even if they are not hiring aggressively.
“After the last few years, many businesses know how hard it can be to replace good people, so they may cut vacancies, reduce hours or delay expansion before making redundancies. For the Bank of England, this does not dramatically move the dial today. The bigger issue is wage growth.
“Pay growth excluding bonuses at 3.4% is cooler, but earnings including bonuses are still running at 4.4%, which is not exactly screaming “job done” on inflation. My view is that the Bank will remain cautious. This data gives them a little comfort, but not enough confidence to suddenly turn dovish. The labour market is softening, but wage pressure has not disappeared.”
People are white-knuckling the roles they’ve got
Harry Goodliffe, Director at Winchester-based HTG Mortgages, said the labour market is “just deteriorating more slowly than some expected”.
He added: “If a 0.1% drop in unemployment is the good news, that tells you everything about where the economy is at.
“We’re talking about a tiny movement against a backdrop of weak growth, stretched households and cautious employers. The labour market isn’t booming, it’s just deteriorating more slowly than some expected.”
Photo by Drew Darby on Unsplash.
