Commenting on the ONS Labour Market statistics for March 2022, BCC Head of Economics, Suren Thiru, said:
“Rising payroll employment and declining unemployment suggests that demand for workers remains robust despite growing headwinds.
“Although there was a modest pick-up in regular pay growth, wages are still comfortably trailing behind inflation, which is putting the brakes on consumer spending by eroding their spending power and confidence.
“While firms are reporting some upward pressure on pay settlements amid a very tight labour market, the deteriorating economic outlook and the historic surge in business costs are likely to keep a lid on pay growth.
“Record vacancies highlights chronic imbalances in the UK labour market with demand for workers outpacing supply. With rising economic inactivity indicating a deep-seated decline in worker participation, particularly among older people, recruitment difficulties may persistently drag on economic output.
“While demand for labour is currently strong, the damage to firms’ finances from rising cost pressures, a weakening economic outlook and next month’s national insurance rise may significantly squeeze recruitment intentions and pay growth in the near term.
“Although the latest jobs data provide no impediment to raising interest rates, concern over the impact of Russia’s invasion of Ukraine may give the Bank of England pause for thought over further monetary tightening.
“We urge the Chancellor to use next week’s Spring Statement to delay the National Insurance rise by one year to give firms the financial headroom to weather this surge in costs facing businesses and support the wider economy.”
