No luck job hunting? You’re not alone - UK vacancies have fallen to a 10-year low

Today’s labour market statistics give us some insight. They show the state of the UK’s world of work, from just before the US war on Iran began impacting the global economy.

The headline offers a rare sliver of good news. Unemployment, which has been growing faster than forecasters' predictions, surprisingly fell a little to 4.9 per cent - a sign that workers entered this crisis in a stronger position than feared. But beneath that number, the picture is more troubling. Well before Trump’s first strikes on Iran, our labour market was already “cooling” – a word economists use to describe slower hiring, fewer job vacancies, lower worker turnover and lower wage growth. A cooling jobs market – especially ahead of an economic shock – is bad news for living standards.

When hiring slows and more people are looking for jobs, workers lose the power to ask for higher pay because employers have their pick of applicants. That translates directly into lower wages, and lower wages mean squeezed household budgets. Sure enough, wages grew by just 0.2 per cent in the latest figures, once inflation is stripped out. For most working families, that means living standards were essentially flatlining even before the war on Iran started pushing energy costs higher.

Vacancies have fallen to their lowest level since 2021. Outside the pandemic, if you are looking for a job, you are competing for the lowest number of vacancies in the last 10 years. Part of the drop in vacancies reflects the NHS winding down an unusually large post-pandemic recruitment backlog. But employers across the economy were already becoming cautious of hiring before the war added yet another headwind for the UK economy.

That falls hardest on those with the least cushion. The “vacancy-to-unemployment ratio” (a measure of how many jobs are available relative to the number of people seeking work) has been worsening, and it is not worsening equally. In the north-east, there are five unemployed people for every vacancy, compared to less than 2 people per vacancy in the south-east. In places like this, a further slowdown in hiring means families facing rent arrears, cutting back on food, or making impossible choices between heating and eating. These are the households with the least savings to weather another storm.

Some of today's fall in unemployment will be explained by some giving up on the job market altogether and becoming “inactive”. But it still represents a modest improvement in our economy: we entered this shock from a slightly stronger starting point than we otherwise could have. But it cannot mask the underlying fragility. The structural buffers that should protect living standards during a downturn (a labour market with jobs to spare, rising real wages, confident employers) have already been worn down. The war in Iran is an external shock that the UK did not choose. But the vulnerability it is landing on was made here at home, built up over more than a year of quietly deteriorating conditions.

____________________

Max Mosley is a senior economist at the New Economics Foundation (NEF). He can be found on X and BlueSky.

LBC Opinion provides a platform for diverse opinions on current affairs and matters of public interest.

The views expressed are those of the authors and do not necessarily reflect the official LBC position.

To contact us email opinion@lbc.co.uk