Jobless rate falls but small firms cut back hiring

UK jobless rate falls to lowest in over a year, but small firms cut back on hiring due to labour costs.

The full report

The UK's unemployment rate has dropped to its lowest for more than a year, according to official figures from the Office for National Statistics (ONS). The jobless rate fell to 4.7% in the three months to August, the lowest since July last year.

However, job vacancies have continued to fall as smaller businesses cut back on recruitment. Vacancies fell by 21,000 in the three months to September to 691,000, with the ONS saying small firms were citing labour costs as a key factor in scaling back hiring.

The figures are the last official snapshot of the jobs market before the Budget, and analysts said they indicated the jobs market was showing signs of recovery despite the weakness in hiring. ONS deputy director of labour market statistics, David Freeman, said the labour market remained "broadly flat", with the latest data showing the employment rate edging up and "a small drop in unemployment".

Energy costs have risen since the Iran war began, and companies have also said that increases in National Insurance and the minimum wage have made it more expensive to employ staff. The number of job vacancies fell to its lowest level in more than five years, the figures indicated, with the largest decrease in construction jobs.

Average earnings excluding bonuses rose 3.7% in the three months to August, up from 3.5% last month. Taking inflation into account, wages grew 0.8% in real terms. Pat McFadden, the Secretary of State for Work and Pensions, said the figures "show the resilience of our labour market" with the UK's employment rate "now the third highest in the G7, despite a backdrop of global uncertainty".

However, he said that "too many young people still find themselves locked out of employment". The government is working with industry "to bring young people back into the labour market and prevent them from drifting into the welfare system", he added.