Job openings drop as small businesses slow down hiring due to high costs

Job openings have dropped across the country in the largest fall seen since the start of the year. Data from the Office for National Statistics shows total vacancies fell by 21,000 to reach 691,000 in the three months leading up to September.

Hiring and Costs

Smaller businesses are driving this drop in recruitment. These firms point to high labour costs as the main reason for cutting back. Companies report that rising energy bills following the Iran war, along with higher National Insurance and minimum wage rates, make it much more expensive to hire workers. The construction sector saw the biggest decrease in job openings, pushing vacancies to their lowest level in more than five years.

Unemployment Rates

At the same time, official figures reveal the unemployment rate dropped to 4.7% for the three months to August, which is the lowest level in over a year. Average pay excluding bonuses went up by 3.7% during the same period. When adjusted for inflation, actual wages grew by 0.8%. ONS deputy director of labour market statistics David Freeman described the job market as broadly flat, noting that the employment rate edged up slightly while payroll numbers remain down.

Youth Employment

Secretary of State for Work and Pensions Pat McFadden said the figures show resilience in the job market, though he noted that too many young people remain locked out of work. Government data shows the unemployment rate for people aged 16 to 24 was 15.6% between June and August. Separate figures indicate that nearly one million young people are not in education, employment, or training. Prime Minister Andy Burnham warned that high youth unemployment risks bringing an economic catastrophe and moral failure. Meanwhile, economists offer mixed views, with Capital Economics senior UK economist Ashley Webb calling the drop in unemployment unexpected while Resolution Foundation senior economist Louise Murphy pointed to signs of economic recovery.

Context

These official labor market figures are closely watched by policymakers because they offer a clear snapshot of economic health before major government budget announcements. Economic shifts like rising energy costs and mandatory wage hikes directly influence how many workers private businesses can afford to hire. Understanding these trends helps explain why overall job openings can fall even while broader unemployment rates drop.