The UK jobs market showed signs of cooling in the first quarter as Britain prepares for an increasingly bitter referendum on its European Union membership.
The number of people in work rose by 44,000, less than a quarter of the gain seen at the end of 2015, the Office for National Statistics in London said yesterday. Unemployment fell 2,000, leaving the jobless rate at a decade-low 5.1%, as forecast by economists. The employment rate edged up to 74.2%.
There were also few signs of wage pressure. Annual pay growth excluding bonuses slowed to 2.1% from 2.2% in the three months through February. Total pay inflation edged up to 2% from 1.9%.
The report adds to signs that firms are putting hiring and investment on hold as polls suggest the June 23 Brexit vote could be close. Job vacancies fell 18,000 to 745,000 in the three months through April, the first decline since the second quarter of last year. Economic growth slowed in the first quarter and recent surveys point to a further loss of momentum. ONS statistician Chris Freeman said there is evidence that the jobs market “could be cooling off.”
Even without the referendum, the labour market might have struggled to maintain the performance seen in the last three months of 2015, when employers added almost 200,000 people. Slowing global expansion took its toll on manufacturers in the first quarter. At the same time, labour shortages and a new higher minimum wage in April mean firms may now be looking to boost efficiency rather than staffing levels.
The Bank of England said in a monthly report yesterday that there’s “some evidence of businesses delaying investment expenditure decisions” because of EU vote uncertainty.
“The momentum of job creation has eased in recent months and we still haven’t seen lift-off for wages,” said Ian Stewart, chief economist at Deloitte. “‘Real wage growth has slowed in the last year, a development that represents a real risk to the consumer-led recovery.” The increase in employment in the first quarter was just sufficient to absorb an extra 42,000 economically active people and the number of unemployed dipped as a result. Jobless benefits, a narrower measure of unemployment, fell 2,400 in April and the jobless-claims rate remained at 2.1%.
With inflation still far below the BOE’s 2% target, policy makers are expected to keep the key rate at 0.5% until early 2017, the median forecast in a Bloomberg survey shows.
Much will depend on the outcome of the referendum and on whether an anticipated pickup in wages is matched by productivity growth, which has been puzzlingly weak since the financial crisis.