'Red flag for jobs market' as vacancies hit lowest level in five years - official figures

The number of job vacancies has hit the lowest level in five years, official figures show.

There are 18,000 fewer roles available than a year ago, according to data from the Office for National Statistics (ONS) for the three months to June.

Not since April 2021, during the COVID-19 pandemic, have there been so few vacancies.

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It's down to smaller businesses pausing hiring or replacing departed staff due to employment and general operating costs, the ONS's director of economic statistics, Liz McKeown, said.

The biggest fall in jobs was seen in professional, scientific and technical activities and in human health and social work, the data showed.

The largest decrease was among small businesses with between one and nine employees, which cut 8,000 vacancies.

This drop in vacancies has been described as "a red flag for the jobs market" by Suren Thiru, the economics director of the Institute of Chartered Accountants in England and Wales (ICAEW).

It suggests "labour demand is shrinking amid soaring employment and energy costs, while greater automation is also squeezing some entry-level roles", he added.

Worse to come

But worse is likely to come, as Mr Thiru said. "The UK jobs market is likely in for a rougher ride in the months ahead, as rising energy costs and growing speculation over tax rises ahead of the October budget dampen employers' appetite to hire."

Despite it seemingly becoming more difficult to get a new job, the unemployment rate remained unchanged at 4.9%.

Pay rise gap

Figures also showed a deepening of the gap between private and public sector wage rises.

Private sector pay growth slowed again to 2.8% while state employees saw annual wages up 6.1%, ONS data showed.

Last month saw private sector wage growth fall below 3% for the first time since 2020.

The slowdown in wage rises means workers are likely to face an extra cost of living squeeze in the coming months.

Inflation is forecast to have risen 2.9% in July, meaning the cost of goods could have outpaced wage growth, bringing about a real-terms pay cut.

What does it mean for interest rates?

While slow wage growth can be challenging for households, it could be welcome news for interest rate setters at the Bank of England.

Economists suggested that weaker wage growth in the private sector could encourage the Bank of England to keep interest rates on hold.

Traders are pricing in a 73% likelihood of no change to the interest rate next month, according to data from the London Stock Exchange Group (LSEG).

No hike at all is anticipated for the remainder of the year.

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