UK firms cut jobs; wage growth slows in cooling labour market
Tax data showed that the number of employees on payrolls dropped by 41,000 in June, said the Office for National Statistics on Thursday (Jul 17). It was worse than the 35,000 fall expected by economists surveyed by Bloomberg. The decline in May was revised to 25,000 from 109,000.
Employers have been cutting back on hiring after their national insurance contributions rose in April, at the same time as a near 7 per cent jump in the minimum wage. Separate data showed that pay growth excluding bonuses dropped to 5 per cent in the three months to May from 5.3 per cent, slightly above the 4.9 per cent forecast.
Evidence of the economic fallout from Chancellor of the Exchequer Rachel Reeves' first Budget has been building in recent data. Rising taxes have been cited as a factor for the back-to-back contractions in gross domestic product in April and May, and were also partly blamed for a pick-up in inflation to 3.6 per cent in the data for June released on Wednesday.
Reeves may have to return with more tax rises in the autumn, despite warnings from the UK's Budget watchdog earlier this week that they risk stifling growth. She said last year that a one-off Budget of tax rises was necessary to fix a fiscal hole left by the previous Conservative administration.
Bank of England governor Andrew Bailey has highlighted the deteriorating labour market as he guides markets towards more interest-rate cuts. Traders put the odds of a quarter-point cut in base rate next month at over 80 per cent. BLOOMBERG
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