The labour market continues to soften but there are still signs of resilience. Vacancies and job-to-job moves continue to decline from peaks but remain 30% and 20% above pre-pandemic levels respectively. The unemployment rate ticked up to 3.9%, driven by long-term unemployment, but remains historically low.
The strength of the labour market remains a key determinant of how much further the Bank of England will raise interest rates to cool stubbornly high inflation. The Bank expects job losses to remain modest over coming quarters as employers prioritise retention of existing workers. Though the hiring appetite for new staff continues to wane, the labour market remains historically tight with just 1.2 unemployed jobseekers for each vacancy.
That tight labour market continues to generate strong regular wage growth at 6.7% year-on-year, still uncomfortably high for Threadneedle Street, but after accounting for inflation real wages were down -2.0%. Public sector wage growth picked up to 5.7% y/y, the fastest since 2003, though remains below private sector wage growth at 7.0% y/y.
Rebalancing is happening on the labour supply side with a record high net flow from inactivity to employment in the first quarter, mainly driven by students entering the workforce. However, inactivity due to long-term sickness hit a new record high.
After a period in which the labour market has been in candidates’ favour to an unprecedented extent, that’s becoming less the case. Indeed’s survey data shows that jobseekers are now less confident in their ability to find a new job in the next month than at any time since the survey began in July 2021. The recent dip in confidence has been particularly marked among older people over 55 and younger people under 25. With the labour market on course to soften further in the coming months, those wanting to find a new job should take action while there are still plentiful opportunities.