The UK labour market suffered its sharpest decline in payroll employment since the height of the Covid-19 pandemic, according to the latest official data, with wage growth cooling and job vacancies continuing to fall.
Figures from HM Revenue & Customs revealed that the number of payroll employees fell by just over 109,000 in May — the steepest monthly fall since May 2020. The annual drop now stands at 274,000. Since Chancellor Rachel Reeves’s inaugural budget in October, payroll employment has contracted by 276,000, prompting concern that rising employer costs — including a £25 billion hike in national insurance contributions this spring — are hitting jobs.
The Office for National Statistics (ONS) also reported that wage growth is slowing. Average pay excluding bonuses rose by 5.2% in the three months to April, down from 5.5% in the previous period and below analysts’ expectations. Including bonuses, wage growth stood at 5.3%, also down from 5.6%.
This cooling came despite the 6.7% increase in the minimum wage in April. KPMG UK’s chief economist Yael Selfin said the figures indicated that wage pressures are likely to ease further this year as the economy slows. “This will limit workers’ bargaining power,” she added.
The UK unemployment rate also edged up to 4.6% in the latest quarter — the highest level since the post-lockdown rebound in 2021. Job vacancies dropped by a further 63,000 to 736,000, as many firms appeared to delay or freeze hiring.
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