The UK labour market has displayed remarkable strength and resilience in the face of an uncertain economic backdrop during the three months to April 2023, with the employment level back to where it was before the Covid-19 pandemic.
However, the labour market remains tight. While inactivity is on the wane, a new record level of long-term sickness and fewer job vacancies is weighing on economic growth.
The seemingly shrinking pool of people with a particular set of skills has forced employers to pull out all the stops to attract and retain talent. As such, regular pay remains among the highest growth rates seen outside of the coronavirus pandemic period. But higher wages have fuelled the inflation fire, which calls into question whether workers were truly getting ahead. When adjusted for inflation, total pay (including bonuses) fell by 2% and 1.3% for regular pay.
Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “The number of job openings in the UK continues to fall. March to May 2023 was the 11th consecutive period to show a fall on the quarter, decreasing by 79,000. The successive uptick in interest rates to combat stubborn and sticky inflation has cast a shadow on UK plc’s behaviour. Many businesses hesitate to take on additional debt due to the exorbitant interest burden, resulting in a reduction in investment and expansion plans put on the backburner., As such, job vacancies suffer.
“When borrowing costs become steep, businesses and consumers alike pump the brakes on spending. The engines of economic activity start to sputter. In such an environment, businesses become more risk-averse, and their enthusiasm for creating new job vacancies wanes.”