The unemployment rate in Britain has soared to its highest level in nearly four years, with wage growth also taking a hit. Some experts have pointed the finger at Chancellor Rachel Reeves, accusing her of burdening businesses with higher costs and suggesting this could be why employers are holding back on hiring.
Data from the Office for National Statistics revealed that the unemployment rate leapt to 4.6% in the three months to April, up from 4.5% in the three months to March. This is the highest level since the three months to July 2021. Average pay rose by 5.2% between February and April, down from 5.5% in the previous three-month period, marking the lowest increase since July to September of last year.
The figures also showed that public sector workers are receiving larger pay rises than those in the private sector – at 5.6% compared to 5.1%. However, most workers are still seeing their wages rise faster than inflation, which should theoretically mean they have more money in their pocket, reports the Mirror.
As the job market falters, do you think the Chancellor is causing unemployment by raising wages and National Insurance? Have your say in our comments section.
While the slowdown in wage growth is a blow for workers, it’s seen as a crucial factor for the Bank of England when deciding when to next cut interest rates. However, the data also highlighted further signs of instability in the labour market. The estimated number of employees on payrolls fell by 55,000 between March and April, with an even larger drop of 109,000 in May.
The ONS has urged caution over these figures, however, as they are subject to revisions. Meanwhile, the estimated number of job vacancies dropped by 63,000 to 736,000 from March to May.
Liz McKeown, director of economic statistics at the ONS, has noted a downturn in the labour market, saying: “There continues to be weakening in the labour market, with the number of people on payroll falling notably. Feedback from our vacancies survey suggests some firms may be holding back from recruiting new workers or replacing people when they move on.”
Alice Haine, personal finance analyst at wealth manager Bestinvest by Evelyn Partners, commented on recent pay growth trends, stating: “UK pay growth eased back in the three months to April as businesses grappled with the full force of Chancellor Rachel Reeve’s National Insurance rate hike for employers and the minimum wage increase at the start of that month. The jobs market showed signs of strain as the changes, first announced by the Chancellor at her maiden Budget last October, went live.”
Suren Thiru, economics director at the Institute of Chartered Accountants in England and Wales, reflected on the impact of April’s financial changes on the job market: “These figures suggest that the UK’s jobs market took a damaging hit from ‘Awful April’, with the tough reality of sharply rising National Insurance and National Living Wage costs pushing more employers to cut staff.”
Lib Dem Treasury spokesperson Daisy Cooper commented: “These figures could not be a clearer signal to the Chancellor, ahead of the spending review, that the Government must change course. The Chancellor’s pig’s ear of a jobs tax is crushing the growth potential of our high-streets and small businesses, pushing people out of work, and ramping up the benefits bill.”
However, Rob Wood, chief UK economist at Pantheon Macroeconomics, offered a different take on the situation, saying: “The data pointed to a gradual – rather than rapid – easing in the jobs market. Also supporting a picture of an only gradually easing labour market were redundancies that dropped to their lowest since before October’s Budget, suggesting that firms are past the worst of the adjustments for higher payroll taxes.”
Specialists are sceptical that the Bank of England will opt for another reduction in its base rate in the upcoming vote by its Monetary Policy Committee next week. The committee had previously made a marginal cut, bringing it down to 4.25%.
Unite general secretary Sharon Graham weighed in on the matter, saying: “As real wages slow again, we have to remember that growth and profits doesn’t always equal jobs and wages. This country needs a joined-up industrial strategy and ambitious public investment to escape the never-ending cost of living crisis.”
As the job market falters, do you think the Chancellor is causing unemployment by raising wages and National Insurance? Have your say in our comments section.
