Zarah ChoudharyThe labour market continued to stabilise throughout February, the latest Recruitment and Employment Confederation (REC) survey by Pantheon Macroeconomics has revealed.
This follows months of negativity following the payroll tax hike and minimum wage increase which have weighed on hiring sentiment since the Autumn Budget.
The February REC moved in the opposite direction to February’s Final Purchasing Managers’ Index (PMI) employment balance, which dropped to a 51-month low, signalling jobs falling at the fastest rate since November 2020.
The REC reached a post-pandemic low in August 2023, when the unemployment rate was around 4.0%, and has remained subdued ever since.
Wage growth fell in February, with the REC reporting a marginal decline in the permanent staff salaries index to 52.1 from 52.6 in January.
The balance has remained within a narrow range since autumn, with the February reading just 0.4 points lower than October, indicating stabilisation in wage growth.
Meanwhile, the temporary staff salaries index, where the impact of the NICs and minimum wage hike is expected to be most significant, increased to 51.1 from 50.5.
The salaries balance suggested that payroll tax hikes have not yet resulted in a meaningful slowdown in nominal wage growth, likely because firms are choosing to pass tax increases into prices instead.
While the REC remained weak, the improvement in the placements and vacancies balances in February – the latter rising to 41.8 from 41.6 in January – suggests stabilisation.
In light of this, Pantheon Marcoeconomics urged the Monetary Policy Committee (MPC) to proceed with caution in the face of stagflationary uncertainties and a labour market that may not be weakening as fast as the most downbeat surveys suggest.
