Wage growth is up from 5.6% to 5.9%, while vacancy numbers have fallen for a 31st consecutive period. Meanwhile, unemployment holds steady at 4.4%.
Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK jobs figures.
“It feels like we’re enjoying the calm before the storm. Big black clouds are swirling on the horizon if you factor in all the surveys and data from recruitment agencies which suggests that businesses are cutting back on their hiring intentions for the year and will consider job cuts and smaller wage hikes after April.
“The pressure of those National Insurance changes coupled with an increase in the National Living Wage is being considered a tax on jobs, and the big question is how bad the post-Budget weather will really get and whether the UK jobs market is sufficiently robust to ride it out.
“Vacancy numbers have been steadily falling back from post-Covid highs, though the number of positions available is still higher before that first lockdown, and looking at early estimates of January’s payroll numbers there is cause for a bit of optimism.
“Employers have a keen understanding of the value of reliable, skilled workers and they’re prepared to keep rewarding that workforce if it means they don’t have to deal with the expense and upheaval of recruitment and re-training. There’s also been an uptick in demand from the construction industry, which has been bolstered by the twin tailwinds of falling interest rates and a government committed to ‘build baby build’.
“Today’s surprisingly robust figures are already having an impact on market expectation for future interest rate cuts, with the MPC carefully monitoring wage growth figures and trying to balance strength there against dismal economic growth. Central bankers will be hyper aware of the tightrope they walk and the lag between their action and the impact on households.
“Markets had broadly priced out a cut at the next Bank of England meeting even before today’s data, but expectation of a cut has dwindled further with less than 23% now thinking that a quarter percentage point cut might be on the cards in March.
“Inflation is expected to have nudged closer to 3% in January after December’s unexpected fall, but how much of that rise will be from factors like energy prices, and how much from the bruised but resilient service sector?
“We know this set of jobs figures comes with warnings about response size which makes it difficult to get a full picture of exactly where we are, but most people believe where we are now is a stop gap and where we end up come the summer is what really matters.”
