Hiring and firing in the UK jobs market is treading water as employers prepare for the new government to raise taxes and toughen up worker rights, a standstill that threatens to become a drag on the wider economy.
High-frequency indicators suggest the number of workers at risk of being laid off in 2024 so far is running almost 12% below levels a year earlier.
That is pushing potential layoffs to near historic lows, according to the Insolvency Service, a sign that businesses are still hoarding labour, afraid of being unable to rehire later on.
Companies aren’t adding workers either.
Separate data from Indeed shows that vacancies have flattened out just below pre-Covid levels, in contrast to countries like France, Germany and the US, where postings are well above where they were in February 2020.
The jobs site also warned that political uncertainty both at home and abroad, with the US election in November and escalating tensions in the Middle East, may well push the hiring pause into 2025.
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The plunge in layoffs is particularly unusual given that it has come after the Bank of England's (BOE) most aggressive policy tightening in decades.
The central bank’s 14 back-to-back interest rate hikes aimed to loosen the labour market, bringing down wage pressures that are feeding into prices.
“Persistent hoarding may slow the return of inflation to target by preventing the labour market from loosening,” Greene said in a speech in May.
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“But if firms suddenly capitulate and stop hoarding labour, unemployment could jump and inflation could undershoot the target.”
The drop in vacancies is creating a tough market for jobseekers.
Recent Adzuna figures showed there were over two candidates per posting in September, the most in three years.
BOE rate-setters remain concerned over strong wage growth and a tight labor market fanning price pressures.
While inflation is close to target currently and the BOE cut interest rates for the first time since the pandemic in August, officials have struck a cautious tone on more reductions.
Money markets are no longer fully pricing in a cut in November.
Companies are “waiting to see whether they can hire rather than whether they should fire,” said Tony Wilson, head of the Institute for Employment Studies.
“The underlying picture on demand and confidence is not terrible, but we still have problems on labour supply.”
