Wage growth has slowed and unemployment is rising, according to the latest figures from the Office for National Statistics (ONS).
The statistics watchdog said the latest figures showed further signs of a “cooling” labour market, as average regular earnings growth eased to 5.6 per cent in the three months to March, the lowest since November 2024.
However, wages also continue to outpace inflation, rising 2.6 per cent after accounting for the Consumer Prices Index.
Experts branded the figures a “major worry”, with the Resolution Foundation blaming chancellor Rachel Reeves’ tax-hiking Budget.
Principal Economist at the left-leaning think tank Nye Cominetti said: “While recent UK data on growth has been encouraging, the labour market picture is a major worry.
“The recent rise in employer National Insurance may have accelerated this slowdown, with the number of hospitality jobs falling particularly sharply since the tax rise came into effect in April.”
The Institute of Chartered Accountants in England and Wales blamed the “double whammy of rising National Insurance and National Living Wage” for the drop in employment.
And the Conservatives seized on the figures to attack Labour’s “jobs tax” as “putting an intolerable burden on employers”. “It’s working people who are paying the price for Labour’s war on business,” shadow work and pensions secretary Helen Whately said.
Figures also show that the unemployment rate ticked upwards to 4.5 per cent in the quarter to March, its highest level since the summer of 2021 and up from 4.4 per cent in the preceding three months. This rise comes amid concerns about the impact of increasing employee costs on businesses.
Figures also show a drop in job vacancies, which remain below pre-pandemic levels for the second consecutive quarter. Additionally, the number of workers on UK payrolls decreased by 33,000 in April, bringing the total to 30.3 million.
Liz McKeown, ONS director of economic statistics, said: “Wage growth slowed slightly in the latest period but remains relatively strong, with public and private sectors now showing little difference.
“The broader picture continues to be of the labour market cooling, with the number of employees on payroll falling in the first quarter of the year.
“The number of job vacancies has also fallen again, with the rate of decline increasing in the last few months.”
Minister for Employment, Alison McGovern said: “Real wages are growing with around 200,000 more people into work since the publication of our Get Britain Working plan.
“But we know that the Government’s Plan for Change needs more workers – in every part of our country. That’s why we will continue to change Jobcentres, invest in British industry, and get help to those who need it until everyone who can work has got a decent job and a good income.”
Julia Turney, Partner and Head of Platform and Benefits, Barnett Waddingham said: “With employer National Insurance hikes now in effect and the Employment Rights Bill expected to progress over the summer, the months ahead will be a real test of how businesses manage the compounding pressures of cost and compliance.
