There are signs the Bank of England’s interest rate rises are making businesses think twice about hiring staff, bringing down the number of vacancies.
Pushing in the same direction, the high cost of living is driving more people back into the workforce.
The effect shows up in the latest labour figures from the Office for National Statistics (ONS) as a fall of 55,000 in the number of vacancies in the three months to April and a 156,000 drop in the number of inactive workers.
Separate HMRC figures showed a 136,000 fall in PAYE employees between March and April – the first reduction since February 2021.
Put together, these figures tell us the UK’s pressure-cooker labour market – with lots of advertised jobs and too few workers to fill them – has begun to come off the boil.
When the Bank of England’s main concern relates to the tightness of the labour market, which is reflected in a high vacancy rate, then these trends will be welcomed by anyone who wants interest rates to fall and growth to pick up.
Businesses welcomed the fall in vacancies, even though the trend is partly due to firms going out of businesses or being too worried to hire new staff.
What they haven’t welcomed is the continuing mismatch between the skills they need and the people looking for work.
The British Chambers of Commerce head of people policy, Jane Gratton, made this issue the main focus of her comments.
“Skills shortages and unfilled job vacancies are the stark reality for many businesses across all sectors and regions,” she said.
“We still have more than a million job vacancies which are damaging the economy by preventing firms from fulfilling order books and taking on new work.”
Kitty Ussher, the chief economist at the Institute of Directors, added: “There are still 282 thousand more vacancies in the UK than before the pandemic. Government policy needs to work harder to ensure that our education and training system is providing the types of skills that employers are looking for.”
These complaints are not going to be resolved quickly. And they are not going to be resolved at all if the government refuses to pump more resources into skills training.
The ONS said its surveys found that people of all ages were returning to the labour market who had previously said they were caring for relatives or retired, though the biggest number of returners were job-hunting students.
Another month of falling wages relative to inflation – the 16th consecutive fall in real pay using the ONS’s three-month average – has also forced many people already in employment to take a second or third job.
The health system is also the focus of attention after a steep rise in the number of people off work with a long-term illness hit a record 2.55 million people.
Ben Harrison, the director of the Work Foundation thinktank at Lancaster University, said the number of people opting out of work on the grounds of ill health “suggests a radically different approach is needed to boost the UK workforce”.
The TUC suggested the government’s mission to make work more insecure and promote a hire and fire culture had backfired.
One of the largest increases in ill-health was among those off work with a mental health issue.
They are telling employers, to adapt one of the playwright Dario Fo’s famous phrases, they “can’t work, won’t work”.
Circumstances are not the same in continental Europe. The activity rate in France, Germany and even Italy is higher than it was before the pandemic. In Britain, it is lower with more than 400,000 fewer workers than in 2019.
And there is no sign of anything more than modest, incremental improvements in the months ahead, which could force the Bank of England to keep interest rates higher for longer.
