The UK jobs market is showing fresh signs of strain, even as wage growth remains resilient — a combination that poses a dilemma for the Bank of England. Recent tax data revealed a drop of 8,000 in payrolled employment between January and February. Preliminary figures for March suggest a steeper fall of 78,000, or 0.3%, ahead of this month’s increase in employers’ national insurance contributions announced in last year’s Budget.

Job vacancies have also declined, dipping below pre-pandemic levels for the first time since spring 2021. Despite the weakening employment figures, wage growth remains strong. In the three months to February, average weekly earnings excluding bonuses rose 5.9% year-on-year, slightly above the previous three-month figure of 5.8%, though just below economists' expectations.

The Bank of England is monitoring labour market trends closely, especially following business surveys indicating a notable slowdown in hiring activity after the Budget. The national living wage also rose in April, adding further complexity to the employment landscape.

Adding to the uncertainty is the recent US decision to impose a 10% import tariff on goods from most countries, including the UK. The move casts a shadow over British exports and the broader economic outlook. Financial markets are now factoring in a potential rate cut by the Bank of England in May, with further easing expected by year-end.v

Public sector pay has seen sharper growth, according to the ONS, while private sector wages remained relatively stable.