Employment growth to slow significantly, EY Item Club warns

Georgina Varley
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The pace of economic expansion is slowing, EY Item Club said (Source: Getty)

The number of people in employment is set to increase a moderate 0.6 per cent this year and then fall by 0.1 per cent in 2018, according to the EY Item Club special report on the labour market published today.

These figures are significantly less than the 1.4 per cent increase seen in 2016.

There are signs, especially in the consumer sector, that the pace of economic expansion is slowing. As a result, there will be a weaker demand for workers, EY said.

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Growth in the economically active population is, therefore, anticipated to slow from 0.9 per cent to 0.4 per cent this year. As a result, the unemployment rate is expected to rise from 4.8 per cent in 2017 to 5.4 per cent in 2018.

Martin Beck, senior economic advisor to the EY Item Club, said: “The UK labour market may be starting to become a victim of its own success. As the proportion of people in work has climbed ever higher, firms may have found it more difficult to fill vacancies, resulting in greater utilisation of the existing workforce and slower jobs growth.”

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He added: “On a positive note, slower growth in the workforce may deliver a boost to what has been a long period of insipid productivity growth.”

The study further identifies the potential for technology and machines to displace some workers. There is likely to be a boost in the supply of workers competing for jobs in sectors where machine advances are less applicable, putting downward pressure on wages in these areas.

The report does, however, expect UK average earnings growth to rise marginally to around three per cent this year, with pay continuing to rise at a similar rate in 2018 and 2019.

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