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The UK labour market showed signs of weakening in February and March even as wage growth remained strong, underscoring the challenge facing the Bank of England as the economy braces itself for the impact of US tariffs.
Payrolled employment fell by 8,000 between January and February according to tax data published on Tuesday. Preliminary figures for March indicated a larger fall of 78,000, or 0.3 per cent of those in payrolled employment, ahead of the introduction this month of higher employers’ national insurance contributions laid out in the October Budget.
Vacancies fell below pre-pandemic levels for the first time since the spring of 2021.
Separate data from the Office for National Statistics showed annual growth in average weekly earnings, excluding bonuses, was 5.9 per cent in the three months to February, up from 5.8 per cent in the three months to January. Economists had forecast a rise of 6 per cent.
The Bank of England is closely watching the employment data after recent business surveys signalled a sharp decline in employment following the Budget. The national living wage also increased this month.
The figures come amid high uncertainty for UK businesses after US President Donald Trump’s decision on April 2 to impose import tariffs on goods from most countries.
UK exports now face a 10 per cent US import tariff, clouding the economic outlook. Financial markets are pricing in a Bank of England rate cut in May, with expectations of two further reductions by the end of the year.
Liz McKeown of the ONS said pay growth had accelerated in the public sector “as previous pay rises fully fed through to our headline figures, while pay in the private sector was little changed”.
