Signs of stabilising labour market, but more young people struggling to find work

UK unemployment rose to 4.8% in the three months to August, with signs of stabilising payrolled employment but growing pressure on younger workers. Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK jobs figures.

Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK jobs figures:

“We’ve got used to taking these jobs figures from the ONS with a pinch of salt, but factor in business surveys, anecdotal evidence from industry and data from recruiters and you can make out a clearer picture of a labour market that’s soft, with younger workers facing the biggest challenges. 

“Businesses warned that changes made to national insurance at last year’s Budget would force them to reconsider who and how many people they employ. Raising the threshold at which national insurance was paid made it more expensive for employers who had lots of part-time staff, many of them being younger workers dipping their toe in the labour market for the first time.

“The fact the ONS has found that the rise in unemployment in the three months to August was driven mostly by younger people suggests those warnings have become reality.

“Those first jobs waiting on tables, stocking shelves at local corner shops and spending Saturdays putting discarded clothing back on hangers provide young people with a chance to develop a work ethic, gain experience and earn a bit of cash that belongs to them. Making it harder to find these types of jobs could have a marked impact on their relationship with work in the future. 

“Older workers, many with huge amounts of experience and a track record that employers can rely on, are now employed at record levels as they seek to create a cushion from all those rising bills. 

“It’s been a tough period of adjustment, but it seems to be showing signs of stabilising. There is another silver lining here, a potential bright side for the sluggish state of UK the labour market, and that’s falling wage growth – something Bank of England rate setters have been waiting to see.

“But business confidence is still fragile in the face of a looming Budget, and with inflation projected to remain uncomfortably high and rising, expectation of another interest rate cut this year is down to less than 40%.”