Fewer Jobs, More Competition, and Potential Rate Cuts
The latest labour market report from Adzuna, a leading job search engine, paints a picture of a cooling market with diminishing job opportunities and intensifying competition for available roles. This trend is fuelling optimism for potential interest rate cuts in the coming months.
Job vacancies have plummeted by over 17% year-on-year and a further 0.5% month-on-month, resulting in a total of 862,000 vacancies across the economy. This marks the fifth consecutive month of declining job opportunities.
The ratio of jobseekers per vacancy has surged to 1.87, the highest since August 2021, indicating heightened competition in the job market. This is particularly challenging for jobseekers, as they face a shrinking pool of opportunities and increased competition for available roles.
Despite the cooling labour market, advertised salaries have increased by nearly 3% over the past year, with a 0.4% uptick between February and March. This uptrend in earnings may embolden the Bank of England's Monetary Policy Committee (MPC) to contemplate interest rate cuts in the upcoming summer months.
Consumer price inflation has eased to 3.2% in March, albeit slightly above private sector forecasts. This easing of inflation, coupled with the cooling labour market, strengthens the case for potential interest rate cuts.
The MPC, which has maintained the base rate at 5.25% since September 2023, is inching closer to its first interest rate cut since 2020. While opinions within the committee vary, the upcoming decision on May 9 is poised to be closely monitored, with expectations of a majority vote to maintain the status quo on interest rates.
The cooling labour market, rising earnings, and easing inflation all point towards a potential shift in monetary policy in the coming months. However, the MPC's decision will ultimately depend on a careful assessment of all relevant economic factors.