In response to today’s labour market figures, which showed 49,000 more people employed between July and September, Michael Martins, Economist at the Institute of Directors, said:
“Employment is still growing, although slower than expected. This likely has more to do with the UK having reached full employment than the vote to leave the European Union. Slower employment growth looks set to continue in the near future, with the proportion of IoD members expecting to increase headcount over the next 12 months (27%) only slightly higher than those foreseeing a fall (22%).
“Vacancies are higher now than they were before the financial crisis, but sectors differ. Arts and entertainment have seen vacancies and wages increase since the referendum, likely due to the depreciation of sterling and an increase in foreign visitors. Whether this proves to be sustainable as the UK approaches the winter season, where the number of visitors usually decreases by 40%, remains to be seen. Real estate firms have reduced employment vacancies by 22%, indicating that the commercial property market’s cooling off has started to affect employment.
“Nominal wage growth is likely to be subdued in the near term, borne out by figures showing 22% of IoD members plan to reduce compensation levels in the next year. As inflation increases on imported goods like food and energy, disposable income will likely take a hit. This will place more strain on smaller firms where margins are tighter and access to credit more difficult, although they are yet to feel the pinch. Vacancies in small firms grew by 4 percent compared to before the referendum. Larger firms are reducing vacancies and therefore future hiring decisions. This is a trend to keep an eye on as big companies tend to pay more, which helps to bolster consumer confidence, but are also more exposed to global markets and therefore uncertainty surrounding the UK’s future relationship with the EU and the rest of the world.”