Unemployment fall may be short-lived as employer costs rise, CIPD warns

The recent dip in unemployment is unlikely to last as mounting cost pressures on businesses begin to feed through into hiring decisions, according to the Chartered Institute of Personnel and Development (CIPD).

Responding to the latest labour market data from the Office for National Statistics (ONS), James Cockett, senior labour market economist for the CIPD, said: “Today’s fall in unemployment marks a reprieve from the recent doom and gloom about the labour market. However, it’s likely that this will be short-lived.

“The latest data cover the period to the end of February, but since then global uncertainty has increased, which in a very short space of time has driven up business costs for employers in the UK. This shock is likely to lead to rising unemployment over the coming months.”

He added: “On top of geopolitical instability, April has seen a number of the key reforms in the Employment Rights Act coming into force. These measures, alongside the increase to the National Minimum Wage, have also increased the cost of employing people.

“The Government needs to engage with businesses on the measures in the Employment Rights Act still to be decided in secondary legislation to ensure these don’t push up business costs further.

“Pay growth is continuing to fall, having reached its lowest level since the end of 2020. But employers will likely see staff bidding for higher awards as the cost of living creeps up once again.”