The number of job vacancies in the UK has plummeted to its lowest level in over five years, as smaller businesses decide that hiring new people is simply too expensive, official figures reveal. The Office for National Statistics (ONS) reported that vacancies fell to 707,000 in the May-to-July period, with small firms citing labour and operating costs as the reasons for scaling back recruitment. Energy costs have risen since the Iran war began, and companies are also feeling the pinch from increases in National Insurance and the minimum wage, making it pricier to employ staff.

Earnings growth picked up slightly overall, but private sector wages grew at their slowest rate in nearly six years. Regular earnings (excluding bonuses) grew at an annual pace of 3.5% in the three months to June, according to the ONS. Public sector pay grew by 6.1% (thank the NHS pay awards for that), while private sector pay dipped to 2.8%.

Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, described the labour market as "stuck in a low-churn limbo," with employers reluctant to hire, fire, or offer bigger pay rises as they grapple with rising costs, global headwinds, and policy uncertainty. He called the persistent slide in vacancies "a red flag," suggesting labour demand is shrinking amid soaring employment and energy costs, while automation also squeezes some entry-level roles.

The ONS said the labour market was "little changed overall," with unemployment holding at 4.9%. Payrolled employees fell by 13,000 in June, and early estimates suggest another 13,000 drop in July.

Secretary of State for Work and Pensions, Pat McFadden, put a positive spin on things, saying it was "encouraging to see signs of progress." He touted reforms to Universal Credit and spending on support for people with health conditions and disabilities. Shadow chancellor Mel Stride, however, was less chipper: "Job vacancies are at their lowest in over five years, and unemployment remains high. Labour are the party of welfare, not work."

Meanwhile, the Conservatives proposed making it easier for young people to get summer jobs, with more flexibility around breaks and shift patterns. But for some young people, the job hunt is a slog. Aaron Diangienda, 19, has been looking for over a year and is heading back to college for a sport diploma. Jasmine Walker, 24, has applied for more than 300 marketing roles since graduating in July. "It's a bit frustrating because you're researching and practising how to make your CV and applications pristine, and yet you still can't get anywhere," she says.

The government's planned crackdown on zero-hours contracts could cost businesses up to £2.9bn a year, according to analysis released last week. The British Chambers of Commerce said business confidence was at a post-pandemic low, and such measures mean firms "will be reassessing their recruitment plans." The TUC, unsurprisingly, called zero-hours contracts "exploitative" and "endemic," with general secretary Paul Nowak demanding secure employment for young people.

Analysts see little sign of inflationary pay growth, so the Bank of England is unlikely to raise interest rates in September. KPMG's Yael Selfin expects rates to stay on hold for the rest of the year. The UK economy grew 0.4% in the second quarter, but internal forecasts suggest growth could be as low as 0.3% in 2027 if the Iran war keeps disrupting shipping through the Strait of Hormuz. So, plenty to look forward to.