Employers deterred from hiring as labour market continues to cool

Responding to today’s ONS labour market figures, James Cockett, senior labour market economist for the CIPD, the professional body for HR and people development, comments:

“Vacancies are continuing to fall as the labour market cools. It appears that the full impact of national insurance changes has now been reached, with the number of payrolled employees remaining stable. However, employers are likely to be cautious about November’s Budget and upcoming changes to employment legislation, which combined may deter hiring further over the coming months.

“As employment costs remain high, it’s critical that employers aren’t discouraged from hiring young people, especially in key sectors like retail and hospitality which provide many young people with their first step into working life.

“Unemployment for young people aged 18-24 has fallen slightly but remains high at 12%, highlighting the need for action by policy makers and employers to create employment opportunities for this group.

“A key priority for the government should be to consult meaningfully on key measures in the Employment Rights Bill still to be decided in secondary legislation. It’s vital these measures don’t act as a headwind on employment growth and add cost and complexity to the process of recruiting and managing new staff, and younger people in particular.

“Equally, there’s a need to strengthen steps to support young people in securing training and employment. The government needs to go further than its planned youth guarantee and introduce an apprenticeship guarantee for all 16 to 24-year-olds, to provide valuable opportunities for young people to both learn and earn. Better training and employment opportunities will ensure they start their working lives on the right foot while helping employers build future talent pipelines.”

On pay:

“There are two key factors likely to be supporting continued high pay growth. Firstly, public sector pay growth is being affected by some public sector pay rises being paid earlier in 2025 than in 2024. And secondly, employers in low wage sectors, such hospitality and retail, continue to be disproportionately impacted by the April rises in national insurance and the minimum wage.”