Private sector employment falling for first time in two years amid economic fears

A new survey found that there has been a reduction in headcounts so far this month, the first time since February 2021 that employment has dropped. In Northern Ireland, however, the latest official data from the government shows that the jobs market has remained stable despite the growing economic concern.

The number of payrolled employees, measured through the PAYE tax system, stood at 783,500 last month – a 0.3% increase over the month and a 2.4% increase over the year – according to latest official labour market statistics for Northern Ireland.

While the employment rate rose, the figures published on Tuesday by the Northern Ireland Statistics and Research Agency also showed, however, an increase in the number of people claiming unemployment benefits to 36,200 – up by 1.2% on the previous month.

In the UK wide survey, meanwhile, companies reported that they were not replacing staff when they left voluntarily because they were worried about the economic outlook, were getting fewer orders and were trying to cut costs.

“It’s no surprise to see that businesses are battening down the hatches, most notably by reducing headcounts, in a sign that the downturn not only has further to run but could yet accelerate again, especially given December’s further hike to interest rates,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.

The manufacturing sector drove the drop in workforce numbers, while in the service sector employment stagnated after 21 months of consecutive growth.

It comes despite a better-than-expected reading in the monthly S&P Global/CIPS flash PMI figures.

The private sector was expected to score 48 in the December flash readings – which are preliminary. However the reading released on Friday morning showed a 49-point reading, up from 48.2.

But the slight easing of the downturn – anything below 50 is considered to show a contraction in the economy – is probably not enough to avoid a recession, Mr Williamson said.

“The December data adds to the likelihood that the UK is in recession, with the PMI indicating a 0.3% GDP contraction in the fourth quarter after the 0.2% decline seen in the three months to September,” he said.

Dr John Glen, CIPS chief economist, said: “Customers were tightening their belts all round in December as new order levels continued to fall in manufacturing and services industries, and for the first time since February 2021 the UK’s stricken economy affected job creation.

“The manufacturing sector suffered another sharp drop in output that was the fastest since August as weak demand and damaged supply chains affected the delivery of raw materials and items such as electronic components.

“Without a strong economic wind behind them manufacturers started to doubt the need for their current headcounts and shed jobs at a quicker pace.”