However, employment still remains below its pre-pandemic figures, according to the Office for National Statistics most recent labour force survey.
Although the rate of growth in job vacancies continues to slow, figures for March to May still reached a new record of 1.3m. Unemployment decreased over the quarter to 3.8%.
Meanwhile, growth in the average total pay for employees reached 6.8% for the period of February to April 2022, this equated to 0.4% in real terms.
However, annual growth in regular pay, which excludes bonuses, fell by 2.2%, the biggest fall since November 2011. As inflation remains at multi-decade highs, the slowing pace in wage growth looks to further tighten living standards.
Hugh Gimber, global market strategist at JP Morgan Asset Management, said: “Typically the textbooks would suggest that monetary policy should try and look through supply-driven shocks, very strong labour markets are making it impossible for policymakers to stand pat. Central banks are therefore being forced to tighten at a time when there are already clear signs that growth is slowing.”
He continued: “Inflation stands at multi decade highs, and while today’s uptick in the unemployment rate may offer a little comfort that the labour market is not overheating, but robust levels of wage growth will definitely have been noted.”
Paul Craig, portfolio manager at Quilter Investors, added: “The Bank of England will feel they are on the correct course when they come to raise interest rates on Thursday – providing no last minute surprises. Certainly, a labour market such as this does not scream an impending recession, but this goes to show how difficult a task Bailey and co has when deciding monetary policy.”
Noting that April’s GDP missed expectation and showed a negative growth, Craig said: “While this could be a minor blimp it could also be the start of something much more worrying and as such it will be important to watch the employment figures closely.”