18 February 2025
If you are covering the latest UK labour market statistics, please see the following comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“Despite ongoing economic uncertainty, the UK labour market continues to show signs of softening, as today’s data confirms a further cooling in hiring activity. While employment remains historically strong, the latest figures suggest businesses are becoming more cautious, balancing cost pressures with concerns about weaker demand.
“The unemployment rate remained at 4.4% in the three months to December 2024, unchanged from the previous period but up on the year, reinforcing signs that job security is beginning to erode. Meanwhile, the employment rate edged up to 74.9%, but this increase masks a slowdown in hiring momentum.
“The number of payrolled employees fell by 14,000 in December 2024, following a drop of 32,000 in November, though the annual trend remains positive, with an increase of 44,000 over the year. Across the final quarter of 2024, payrolled employees declined slightly by 3,000 but rose by 106,000 compared to the same period a year earlier. While the early estimate for January 2025 suggests a rise of 21,000, these figures remain subject to revision and should be interpreted with caution. The underlying trend indicates that businesses are treading carefully when it comes to hiring, particularly as economic uncertainty lingers.
“Vacancies also continued to decline, falling by 9,000 in the three months to January 2025, bringing the total to 819,000. This marks the 31st consecutive quarterly drop, but vacancies remain above pre-pandemic levels. While businesses are becoming increasingly hesitant to take on new staff, demand for workers has not completely collapsed.
“Wage growth remains a key concern for the Bank of England. Regular pay, excluding bonuses, grew by 5.9%, while total pay, including bonuses, rose by 6.0% in the final quarter of 2024. This slight acceleration in earnings growth may complicate the Bank’s decision-making, as it must balance concerns over a slowing economy with the risk that strong pay growth could sustain consumer spending and slow disinflation.
“The upcoming changes to employer National Insurance contributions are also expected to weigh on hiring decisions, and today’s data suggests businesses may already be adjusting their workforce strategies to manage higher costs. If economic conditions continue to deteriorate, we could see wage growth moderate more sharply, but at the cost of rising job losses.
“This morning’s figures follow last week’s GDP release, which showed the UK economy grew by 0.1% in December 2024 reinforcing concerns that growth is stagnating. While the UK is not yet in dire straits, today’s numbers indicate that economic momentum is continuing to slow, and the combination of weaker hiring, slowing pay growth, and fading business confidence could push the economy closer to a downturn. The Bank of England will be watching these figures closely as it considers its next steps.”
