The Chartered Institute of Personnel and Development (CIPD) reported a decline in the UK employment intentions gauge to +8, its lowest since the post-COVID period. Large private-sector employers mainly contributed to the drop, driven by uncertainty and rising costs.

The KPMG and Recruitment and Employment Confederation (KPMG/REC) survey indicated a decline in job placements, though the rate of decline slowed from March. April saw a sharper fall in overall staff demand, indicating a weakening labour market.

Bank of England Signals Labour Market Softening

The Bank of England has also signalled a softening labour market, despite concerns over high wage growth. First-quarter wage growth figures are anticipated on Tuesday, expected at nearly 6% annually. CIPD estimates median pay settlements to be around 3%.

BDO’s composite employment index showed a 12-year low in April. This reflects a downturn in employment metrics, indicating challenges in the UK labour market.

The immediate picture is one of cooling demand in the labour market, with large firms tightening their hiring intentions. According to the first data point, the employment index from the CIPD has slipped to levels not seen since the initial recovery from the pandemic. That move appears to be led by larger businesses, where increases in operational costs and broader economic uncertainty have likely pushed recruitment plans down the priority list. Employers may be viewing the current environment cautiously, opting to slow additional headcount growth in order to preserve margins during a potentially volatile quarter.

What’s particularly striking is that this downtick comes alongside fresh evidence of an easing in job placement momentum from the private recruitment sector. The KPMG/REC indicator did show less of a fall than in March, but it is still falling, which can be read as a thinning in employer appetite for permanent hires. Demand for new hires isn’t simply slowing—it’s showing stronger signs of contracting, especially in traditionally stable sectors. The April numbers here point to a rather clear message: firms are preparing for a period of limited capacity growth, perhaps betting on weaker consumer activity or uncertainty elsewhere prompting restraint in forward hiring.

Meanwhile, the Bank has already started adjusting its tone on labour strength. It’s now observing a moderation in the jobs market. This is an adjustment worth taking note of, especially if it continues in tandem with a shrinking demand for labour. However, strong wage growth remains a sticking point, and the Bank will still be watching this data carefully. On Tuesday, the release of Q1 wage figures is expected to show annual growth remaining just below 6%. This suggests tightness in the labour supply persists in some sectors, or simply that pay inflation is running on delay against earlier market pressures. Yet, the inconsistent trajectory of pay growth across the economy means income gains are not being evenly felt.

Impact of the BDO Employment Index

We have also seen the BDO employment index print its lowest reading in over a decade, underscoring the message that there is no single datapoint painting too positive a story. Consistency across these gauges signals that firms are scaling back their workforce ambitions, and are most likely recalibrating their forecasts for demand in the latter half of the year. For those of us monitoring risk levels, this steady loss of momentum—across both hiring sentiment and realised staff demand—has shifted the balance in favour of a softening economic cycle, at least on the employment side.

The cumulative effect of all these indicators points to lower economic churn and a possible inflection ahead. For markets, there is little ambiguity here. When we take this set of data, the interpretation leans toward a market where growth indicators may no longer justify previous volatility expectations. This makes near-term rate expectations all the more pressing: pricing pivot risk may intensify from here, particularly if wage data comes in softer than forecast.

In derivative positioning, we’re inclined to revisit recent volatility assumptions and begin viewing labour sensitivity as one of the more reactive variables in the macro mix. Rate movement linked to softening job data tends to arrive earlier than the higher-frequency inflation components, as we’ve seen previously. The next fortnight will likely bring sharper conclusions from policy updates and internal Eurosystem outlooks, but for now forward measures tied to job resilience should be under review.

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