Britain’s jobs market is showing early signs of strain following the outbreak of the Iran war, with new data published on Tuesday, April 21 showing a sharp decline in hiring confidence and record-low vacancies. Reflecting the immediate impact of the conflict, March saw the lowest number of job postings in almost five years.
Businesses reduced hiring in response to rising energy prices and global instability, causing vacancies to drop to 711,000, the lowest level since the start of 2021.
Additionally, preliminary tax office data also pointed to a decline of 11,000 on payrolls during the month.
Despite the slowdown in March, official data for the three months to February showed a surprise decline in the unemployment rate to 4.9% (down from 5.2%).
However, economists warn that this figure is misleading; This decline was largely due to an increase in economic inactivity, especially among students who are no longer actively looking for work.
Annual growth in regular wages slowed to 3.6% in the three months to February. Although this is the lowest since the end of 2020, it was still higher than the 3.5% expected by economists.
The BOE is in a tough position as data showed wage pressures are not easing as quickly as energy inflation has surged due to the Iran war, prompting investors to step up bets on interest rate hikes.
“Big picture, we don’t think today’s data will change the BOE’s labor market outlook,” said Sanjay Raja, Deutsche Bank’s chief UK economist. “The UK labor market is not out of the woods yet.”
“Unlike the 2022 energy shock, the labor market remains in a weak state, constraining workers’ bargaining power, making a potential wage-price spiral less likely,” said Yael Selfin, chief economist at KPMG UK.
Investors on Tuesday estimated the BOE’s interest rate hike of 36 basis points this year, up from 30 basis points on Monday by between one and two points.
In contrast, BoE Governor Andrew Bailey has said the central bank should provide a clear path to defining risks to growth and jobs as well as inflation when making its next rate decision.
