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2022's labour market slows into autumn

The number of jobs in the UK rose to a record 35.8 million in June 2022, according to figures from the Office for National Statistics (ONS), yet job vacancies have dropped.

The figure is up 290,000 from March 2022 and exceeds pre-Covid levels recorded in December 2019.

The number of job vacancies in the UK also fell to 1,266,000 between June and August 2022. This represents a decrease in vacancies of 34,000 from March to May 2022, which is the largest quarterly fall since 2020.

Job vacancies in the UK:

Hiring demand increases as unemployment rates fall

Employers facing up to nine months of unfilled vacancies

HR in demand in scramble for talent

Lauren Thomas, UK economist at job site Glassdoor, said any companies struggling to hire should target students and the over-65s.

She said: "The ONS’s latest labour market report tells us that summer’s red-hot labour market is starting to feel an autumn chill, with vacancies down for the second month in a row after nearly two years of nonstop growth.

"Employers struggling to hire should focus on the over-65s, whose employment rates are tied for the second-highest on record. Students are another possibility to focus on; they’ve driven a large share of the rise in economic inactivity during the pandemic, but many will be returning to the labour market after their programmes end."

There was growth in average pay for workers of 5.5% – including bonuses – between May and July 2022. However the data also showed a drop in real pay for workers during the time period, owed to the high levels of inflation currently experienced in the UK.

Real pay dropped 2.6% between May and July, just shy of a record 3% experienced earlier this year.

The disparity between the public and private sector was also shown; average regular pay growth for the private sector was 6% from May to July, and 2% for the public sector, the largest gap between the two outside of the pandemic. 

Martin Beck, chief economic advisor to economic forecasting group EY Item Club, said the pay figures will influence the Bank of England's Monetary Policy Committee to continue to raise interest rates.

He said: "We expect that the significantly faster growth in pay than the pre-Covid norm will probably carry more weight in the Monetary Policy Committee's thinking in advance of next week's monetary policy decision than the weakness of employment growth or the fall in vacancies.

"The forthcoming energy price cap for businesses should cut the risk of a substantial rise in redundancies, which also points in a hawkish direction for interest rates. The EY Item Club expects unemployment to rise, but anticipates a softer landing compared to past economic downturns. So, on balance, the MPC is likely to take the latest developments in the jobs market as a reason to continue raising interest rates.”