AJ Bell head of financial analysis Danni Hewson argues that the headline dip in UK unemployment to 4.9% conceals a materially weaker picture in the jobs market, with vacancy numbers falling to their lowest level in five years.
Hewson warns that a 0.3 percentage point rise in economic inactivity suggests much of the apparent improvement in unemployment simply reflects job seekers dropping out of the search altogether, rather than finding work.
The ratio of 2.5 unemployed people per vacancy gives employers room to suppress pay growth, and wage increases held at 3.4%, still above inflation but insufficient to signal a tightening market; Hewson links the softness in hiring to domestic policies raising the cost of labour and to business uncertainty stemming from Middle East conflict, with employers pausing growth plans as a result.
"There is a real fear that younger workers will be badly scarred by what could be a protracted period of weakness in the jobs market," Hewson said, adding that the data reinforces expectations the Bank of England will hold the base rate steady rather than risk further strain on an already fragile economy.
