Labour market has the ‘wind in its sails but choppy waters ahead’

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Responding to the latest official labour market statistics for the UK, showing the unemployment rate fell to 3.9%, Tej Parikh, Senior Economist at the Institute of Directors, says:

“The labour market continues to have the wind in its sails, but there may be choppy waters ahead.

“Businesses have been steadfast in bringing on board new staff and in creating vacancies, despite question marks over the future path of the economy. Meanwhile, as unemployment has fallen, competition for a shrinking pool of workers has pushed up salaries and buoyed households.

“But with uncertainty around Brexit reaching a crescendo, firms are becoming more and more cagey over their hiring decisions. Business leaders are also facing a cumulative burden of cost pressures which will limit just how high they can raise wages to attract the workers they need, while the pinch of talent shortages will begin to bite harder.

“To build on the current strength in UK employment, employers will want to avoid a disorderly withdrawal from the EU and will above all be urging policymakers to return some much-needed oxygen to the skills and productivity agenda.”