The job market remains in decline due to the employers National Insurance hike as hiring continues to slow, job vacancies decline, and competition for jobs intensifies, particularly in the human resources (HR) sector.
New Report
A new report from the Office for National Statistics (ONS) reveals that finding a new job has become increasingly challenging. Employers have scaled back not only on annual pay increases, but also on recruitment efforts as economic uncertainty persists.
The report found:-
- Unemployment Rate: The unemployment rate held steady at 4.7% for the three months to June 2024, a four-year high. While this figure has not risen dramatically, it underscores a trend of stagnation rather than improvement.
- Vacancy Decline: The number of job vacancies dropped by 44,000 over the same period. This marks the 37th consecutive quarter of falling vacancies, with total vacancies now at 718,000, well below pre-pandemic levels.
- Pay Growth: Pay growth, including bonuses, slipped from 5% to 4.6%. When excluding bonuses, pay growth remained static at 5%, indicating that many employers are trimming incentives rather than base salaries.
There is great caution amongst employers in relation to hiring, as evidenced by their reluctance to replace staff who leave or to hire new employees. The consistent message from recent research is that that numerous employers are opting to either freeze recruitment or to hold off on making new commitments until economic conditions improve. The Chartered Institute of Personnel and Development (CIPD), for instance, found that the number of employers planning to recruit in the next 3 months had fallen from 65% to just 57% since Autumn 2024.
The main reason for the reluctance to recruit amongst employers was the decision by the Government to increase employers' National Insurance contributions with effect from the 6th April 2025, which added £25 billion to employers costs.
Young workers, along with those in the retail and hospitality sectors, have been some of the most adversely affected by the downturn in recruitment.
New research conducted by Funding Circle has found that HR is currently the most competitive sector in the economy in terms of trying to secure a new job, with an estimated 129 applicants for every vacancy. Hospitality and retail roles are also difficult to find.
In terms of HR, the report found that:-
- Number of Vacancies: There are currently around 4,961 live HR roles available nationwide.
- Applicant Volume: Over 118,800 annual job searches target these positions.
- Success Rate: With so many applicants per vacancy, each candidate faces less than a 1% chance of securing a role.
The number of applicants per vacancy is also well above 100 in both retail (119) and hospitality (112).
At the other end of spectrum, however, there remain some sectors where there are talent shortages.These include:-
- Design Jobs: Only seven applicants per role makes this one of the least competitive fields.
- Law & Education: These sectors offer success rates between 10–15%, thanks to lower applicant numbers relative to available positions.
- IT Roles: With an estimated 8% success rate per applicant due to high demand and digital skills shortages, tech remains one of the most accessible fields for qualified candidates.
The decision to hike employers' National Insurance contributions as part of last April's tax grab by the Government was an extremely foolish decision that has effectively put a ball and chain around the economy, and has backfired badly. The Office for Budget Responsibility (OBR), for instance, project that it will:-
- Reduce potential output by 0.1%
- Reduce labor supply by about 50,000 hours
- Add 0.2% to inflation
As we have highlighted previously, growth in the economy is best achieved by reducing taxes, not by increasing them. Tax grabs should always be an absolute last resort. But the very worst thing that the Government could have done was to put up employers' National Insurance contributions. Not only did that represent a tax on jobs, but it was always guaranteed to do the absolute maximum damage to the wider economy.
If the Government really needed to raise a quick £25 billion in extra taxes, then rather than put up employers' National Insurance contributions, it should have focused firmly upon what are known as "sin taxes" instead - taxes levied on goods and services that are harmful and costly to society (e.g. tobacco, alcoholic, gambling, and sugar). As the National Bureau of Economic Research (NBER) points out, applied properly, sin taxes would ultimately deliver a net benefit to both the economy and society. The public health benefits would be considerable, and those benefits would ultimately feed through to the economy (i.e. reduced spending on healthcare, increased productivity delivered by a healthier workforce, and increased revenue for public services).
Navigating a Challenging Landscape
The recent hike in employers' National Insurance contributions has cast a long shadow over the job market, exacerbating hiring slowdowns and intensifying competition, especially within the HR, retail, and hospitality sectors. The data paints a clear picture: vacancies are dwindling, pay growth is stagnating, and job seekers, particularly young people and those in vulnerable sectors like retail and hospitality, face uphill battles.
The Government is right to prioritise economic growth, but they have been going about it in completely the wrong way. Accordingly, a policy rethink is required, with the emphasis firmly upon reducing taxes, especially business taxes
