Is Rachel Reeves a toxic influence in the workplace?

If you make hiring people more expensive, fewer people get hired. That might seem a bit like saying "grass is green", but it appears someone forgot to tell the chancellor. We're now living with the results. The latest labour market update from the Office for National Statistics (ONS) shows job vacancies took a swan dive between March and May, declining by 63,000 to 736,000. The number of available openings has been in decline for quite some time, but that is a particularly big fall. It coincides with — and clearly shows the effect of - the chancellor's decision to increase employer national insurance contributions (NICs), which came into effect at the beginning of April.

No wonder that 77 per cent of businesses with more than 10 employees told the ONS in late May 2025 that staffing costs — which includes wages, bonuses, national insurance and pension contributions - increased over the last three months. When the tax rise was announced, several big employers gave warning that the inevitable consequence would be fewer hires. Probably layoffs, too. "Feedback from our vacancies survey suggests some firms may be holding back from recruiting new workers or replacing people when they move on," said Liz McKeown, director of economic statistics at the ONS.

This used to be called "natural wastage". If, when, employers decide they need to cut their labour costs, it is much better to do so by not replacing people when they leave than it is by big, expensive and disruptive redundancy programmes. But make no mistake: they might still be coming. Reeves claimed when she raised employer NICs that this was not a tax on "working people". But, as I've said before, it is — and a particularly harsh one when one considers the impact on those who lose their jobs and then can't find new ones.

When ministers tub-thump and tell people to "get a job or else", those people might very well respond with: "Hang on a minute, you lot have taken the jobs away." Other numbers that underline the point. The revised estimate of the number of employees on payroll in April 2025 was down 55,000 on the month. The provisional estimate for May 2025 was down another 109,000. At 4.6 per cent, the official unemployment rate is now at its highest in nearly four years.

In response, Capital Economics said the while UK jobs market while the jobs market is "clearly weakening" this is not "a collapse". Do you want to add the "yet" or shall I?

I get that Reeves was dealt a bad hand when she entered office. Public finances were in a mess (and still are); Britain was borrowing too much (and still is); and the public services were creaking (again, they still are). While that wasn't her fault, the method she chose to try and fix things was a bad one 1 as is being made increasingly clear. She could have shared the load, perhaps by raising personal NI alongside employer NICs, softening the blow by making it temporary. I know, I know, Labour promised not to raise taxes on working people — but, I repeat, a tax on jobs is a tax on working people so, really, what's the difference?

With that ship having sailed, and the public finances still shaky, it looks like a raft of painful spending cuts are coming, along with still more unpopular tax rises. File under "playing a bad hand badly." If there is any consolation to be had from a thoroughly rotten set of numbers, it is this: wage rises, which have been running hot for quite some time, fell quite sharply, to 5.2 per cent from 5.6 per cent. Why is that good news? It's something that the Bank of England pays close attention to.

Consider, too, that the ONS got its sums wrong when calculating the rate of inflation for April. It came up with 3.5 per cent in the most recent edition of the Consumer Prices Index (CPI) when the number should have been 3.4 per cent. That might not look like a big difference, but in economic terms, it matters — a lot (and also affects our bills). Put all this into the pot, and the gloom that had settled over interest rates has maybe lifted a little.

As I've previously written, the rate setters on the Bank of England's Monetary Policy Committee (MPC) are having to grapple with too much dodgy data. Problems with the labour market survey were well known before the ONS had to admit that it mucked up the inflation rate (note that it isn't revising it). But even if some of the numbers are less reliable than we might hope, the economic mood music has clearly changed. And it isn't likely to improve much when Reeves unveils her spending review.

If I'm right, and we do see more rate cuts as a result of all this, that would be a good thing. Because high rates are currently throttling the economy. Note that the biggest fall in vacancies affected the smallest business (those with less than ten employees). Those businesses are highly sensitive to interest rates. They've been crying out for cuts to ease the sky high cost of small business loans. If the MPC heeds its calls, it might be able to reconsider its hiring decisions.