The slump in the number of payrolled jobs in May is a painful lesson in basic economics: if you make it much more expensive to employ people, fewer people will be employed.
Payroll employment has now fallen by a total of 277,000 since June 2024, consistent with the downbeat signals from every major business survey.
The worldwide uncertainty created by US tariffs has played some part. But surveys still show that the UK is a global outlier on jobs.
This underperformance reflects the jump in payroll costs following the increases in employer National Insurance and in the national minimum wage.
It is no coincidence that the largest job losses have been in the sectors most exposed to higher payroll costs, notably hospitality and retail. Payroll employment is still growing in parts of the economy which are dominated by the public sector, especially health and social work. These jobs still add value, but low productivity means that higher employment is not being matched in higher output.
The one silver lining is that the cooling in the labour market will make it easier for the Bank of England to keep cutting interest rates. But even this is a mixed blessing, because it reflects the renewed weakness of economic activity and slowing wage growth.
The boost to consumer spending from rising real income will also continue to fade, especially if people are more worried about losing their jobs.
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