Responding to latest official labour market statistics, showing the employment rate rose to a record high of 76.3% in November, Tej Parikh, Chief Economist at the Institute of Directors, said:

“The UK labour market remains in fine shape, with a renewed surge in jobs growth providing uplift for the economy.

“Businesses have been eager to recruit over recent years, and higher employment levels have in turn supported household incomes. However, many positions remain unfilled, and as it becomes harder to find matches for particular roles, firms will increasingly look to close vacancies and tone down their hiring plans.

“The other side of the coin is pay. Wage growth has disappointed in recent months, but with inflation also weakening, consumers’ spending power should not be overly impacted. In particular, small businesses have been struggling to raise salaries to attract new staff, and they will be hoping for cost-cutting measures at the March Budget, alongside more investment in the UK’s gummed-up skills system.

On the implications for the Bank of England’s monetary policy, Tej said:

“The recent weakness in the pay data may provide motivation for the Bank of England to cut interest rates at its next meeting. However, the Bank will also be looking out for signs of a bounce in economic activity following the election.”