Warning: members of the public are being contacted by people claiming to work for AXA Investment Managers UK Limited.  Find out more information and what to do by clicking here.

Investment Institute

UK Reaction: April payrolls and March LFS - UK Labour Market continues to tighten

  • 19 May 2022 (3 min read)

  • The UK labour market continues to tighten; unemployment fell to 3.7%, the lowest level since 1974 and for the first time there are fewer unemployed people than job vacancies.
  • The employment rate rose to 75.7% but remains 0.9ppts lower than early 2020 (Dec-Feb 2020). Inactivity continues to add to pressure on the labour market rising further this quarter. 
  • Average earnings (ex bonuses) picked up slightly, increasing by 4.2% in the 3 months to March whilst total pay (including bonuses) jumped to 7% as one-off payments grew.
  • We expect the continued tightness of the labour market will see the MPC deliver rate hikes in June and August. 

The Labour Force Survey (LFS) estimates for January to March 2022 indicated continued strength in the labour market with unemployment falling to 3.7% and for the first time since records began, there are fewer unemployed people than job vacancies. The employment rate rose to 75.7, up 0.1ppts over the quarter, but the rate still remains 0.9ppts below where it was before the pandemic in Dec-Feb 2020. The trend of rising inactivity continued to add pressure on a tightening labour market, with the economic inactivity rate increasing to 21.4%, leaving inactivity 1.1ppts above where it was prior to the pandemic. Recent increases have been driven by those aged 50 to 64 years exiting the workforce. 

Average earnings (ex bonuses) picked up slightly, increasing by 4.2% in the 3 months to March. In real terms this represents a fall in average earnings growth by 1.2% on the year and with inflation forecast to reach over 9% in the coming months this fall in real incomes is set to increase.  Total pay (including bonuses) rose unexpectedly to 7% in the 3 months to March reflecting much higher one-off payments and variation in pay growth between sectors has widened.  

The more-timely HMRC estimates of payrolled employees for April 2022 posted a rise of 121k on the revised March figure (revised up to 59k from 35k), to a record 29.5 million. The number of job vacancies in February to April 2022 also rose to a new record of 1.3m. However, the rate of growth in vacancies continued to moderate – vacancies increased by 35k, the smallest increase since Jan-Mar 2021. 

The UK labour market remains tight; indicators suggest this is beginning to ease as growth in employment and vacancies slows. There remains some scope for tightness to ease over the coming quarters as some of those who exited the workforce during the pandemic begin to re-enter. We expect the Monetary Policy Committee (MPC) to hike rates in June, and we forecast one more rise to 1.5% after that in August. We see the labour market as key to the BoE and suspect that slower growth and a slacker labour market will see them pause. A labour market that remains tight could see the BoE hike more. 

Financial markets reacted to the strength of today’s print with sterling rising by 0.2% against the dollar. 

Related Articles


Changing of the Guards


France: political uncertainty to persist


Looking for some Glue


    This press release should not be regarded as an offer, solicitation, invitation or recommendation to subscribe for any investment service or product and is provided for information purposes only. No financial decisions should be made on the basis of information provided.

    This document is for informational purposes only and does not constitute investment research or financial analysis relating to transactions in financial instruments as per MIF Directive (2014/65/EU), nor does it constitute on the part of AXA Investment Managers or its affiliated companies an offer to buy or sell any investments, products or services, and should not be considered as solicitation or investment, legal or tax advice, a recommendation for an investment strategy or a personalized recommendation to buy or sell securities.
    It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date.
    All information in this document is established on data made public by official providers of economic and market statistics. AXA Investment Managers disclaims any and all liability relating to a decision based on or for reliance on this document. All exhibits included in this document, unless stated otherwise, are as of the publication date of this document.
    Furthermore, due to the subjective nature of these opinions and analysis, these data, projections, forecasts, anticipations, hypothesis, etc. are not necessary used or followed by AXA IM’s portfolio management teams or its affiliates, who may act based on their own opinions. Any reproduction of this information, in whole or in part is, unless otherwise authorised by AXA IM, prohibited.
    Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 22 Bishopsgate London EC2N 4BQ. In other jurisdictions, this document is issued by AXA Investment Managers SA’s affiliates in those countries.

    Risk Warning

    The value of investments, and the income from them, can fall as well as rise and investors may not get back the amount originally invested.