Over the past year, some 142,000 payrolled jobs have been lost, according to the latest labour market figures from the Office for National Statistics (ONS). Another 8,000 disappeared last month alone. Unemployment remained at 4.7 per cent – higher than a year ago. The bulk of job losses came in accommodation and food services, which shed 90,000 workers. The culprit seems obvious: the anti-business tax raid unleashed by the Chancellor in the last Budget.
That £25 billion hike on employer National Insurance, as well as the increase in the minimum wage, is not just discouraging job creation but making employers think twice about keeping people on. And with the government’s employment rights bill sailing through parliament businesses fear things can only get worse.
We don’t just have to take the word of the ONS – whose statistics have been deeply flawed over the last few years – there is a host of private surveys pointing to the same problem. The firm Manpower found last week that Britain had by far the biggest reduction in hiring plans over the last year. The global average was a two percentage point reduction and the next-worst country, Singapore, saw a fall of 9 points. For Britain it was 17.
There is a route for the Conservatives to argue they are the party of economic sense
The Bank of England too – who rely more on their own surveys due to a lack of faith in the ONS – released data recently showing that in response to the National Insurance increases, over a third of firms said they’d raised prices in response. Meanwhile, nearly half said they’d cut jobs and 20 per cent said they’d paid lower wages than they otherwise would have done. When looking at the minimum increases, some 29 per cent said jobs had been lost as a result. For Rachel Reeves to argue she has not raised taxes on working people is now simply incredible.
The Tories spy an opportunity (perhaps their only one) here to gain some ground. With Reform’s focus elsewhere and Labour constrained by their backbenches, there is a route for the Conservatives to argue they are the party of economic sense as we hurtle further towards crisis. Indeed shadow business secretary Andrew Griffith said:
Unemployment is becoming the canary in the mine for the damage the government is doing. From jobs taxes to their UnEmployment Bill, they seem to have zero feel for how to keep people in work.
Meanwhile, there were problems for the Bank of England in this morning’s figures too. Its decision to cut rates last month was justified on the basis that wage growth was cooling and the labour market was loosening. Yet pay continues to rise faster than inflation, with total earnings (including bonuses) growing by 4.7 per cent, up from 4.6 per cent the previous month – precisely the opposite of what the Bank wants to see.
The Bank’s Monetary Policy Committee (MPC) will announce their latest interest rates decision on Thursday and it’s already near impossible that they’ll do anything other than hold rates at 4 per cent. The continuing cooling in the jobs market may encourage some to vote for more cuts but the majority will be concerned that wage growth remains strong. And with the fresh inflation figures due tomorrow unlikely to show any relief, the MPC will be forced back to its primary task: getting a grip on rising prices.
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