The number of payrolled employees in the UK fell by almost 80,000 in March in an early indicator of a jobs fall out from Labour’s hikes in employer National Insurance bills.
The 78,000 fall in the PAYE measure of employment last month to 30.33 million was the first drop since April 2021.
Rachel Reeves announced in her Autumn Budget last October higher rate of employer NI contributions and lower thresholds at which they kick in.
Although they did not kick in until the start of the new tax year on 6 April many firms had already started looking at ways of reducing their wage bills in advance.
The Chancellor said the measures would raise an extra £25 billion a year by the end of the decade to help close a huge shortfall in the public finances.
However critics have condemned the move as “tax of jobs” that will lead to a wave of redundancies and higher unemployment.
Reacting to today’s data from the Office for National Statistics (ONS) forecasters Capital Economics said they “provide some tentative evidence that businesses started to respond to rises in business taxes and the minimum wage from this month by reducing headcount.
“Jobs growth could be hit further from the recent increase in uncertainty due to the chaotic way US tariff policy is being set .”
Despite the fall in the number of people on PAYE the official unemployment rate - a more lagging indicator of the level of joblessness - was unchanged at 4.4% for the December to February quarter.
However, London’s unemployment rate is by far the highest of any region in the UK at 6.5%.
Today’s ONS jobs market figures also showed wages continuing to rise well above inflation in the December to February quarter. They were up 5.9% in a year excluding bonuses and 5.6% including them.
After inflation, wages rose 1.9% including bonuses and 2.1% excluding them.
Vacancies fell for the 33rd successive quarter, and for the first time they were below the pre-pandemic level.
Thomas Pugh, economist at consulting firm RSM UK said: “The biggest drop in payroll numbers since the pandemic suggests that firms started trimming their workforce in March ahead of the significant increase in employment costs which came into effect in April.
“More importantly for the Bank of England, private sector wage growth eased off as well. That would have made a rate cut in May more likely even without the economic turmoil unleashed by President Trumps’ tariffs. A rate cut next month now looks like a sure bet. “
