Responding to latest official labour market statistics, showing the unemployment rate fell to 3.8%, Tej Parikh, Chief Economist at the Institute of Directors, said:

“At a testing time, the labour market is surpassing expectations, though there are early signs the jobs boom could be cooling down.

“As so many people have entered work, there has been an uplift to household incomes which has helped to keep consumers ticking. For a long time, businesses have been eager to expand their workforce despite difficult economic conditions. With the supply of available workers shrinking and uncertainty lingering, firms are now beginning to dial down their recruitment ambitions.

“Vacancies are likely to continue falling. It’s becoming harder for business leaders to do any meaningful workforce planning, let alone find the talent that they need. High costs and an unclear view of future revenue have also led some to hold off on new hires. Meanwhile, though the ongoing strength in pay packets is a plus for workers, wages may be pushing at their limit. Cash-strapped SMEs in particular are already finding it difficult to compete for talent by upping their salary offers.

“While the jobs market continues to be a strong suit for the economy, emerging signs of a slowdown should focus the minds of policymakers. Businesses up and down the country are seeking improvements to the skills system and clarity on the future immigration system to inform their hiring plans going forward.”