Labour's jobs crunch ahead of Budget: Vacancies slump to 12-year low outside Covid despite unemployment easing - with firms blaming tax raids and minimum wage hikes

Brits have been warned of a 'flashing red light' on the jobs market today as figures showed vacancies at a 12-year low outside Covid. With barely a week until Chancellor John Healey delivers the Budget, official data laid bare the fragile state of the market for workers. Although unemployment dipped in the three months to August, payroll numbers were still down 66,000 over the year to September. And the closely-watched vacancies metric showed they had dropped 21,000 to 691,000 in the three months to September. That was the biggest decline since the three months to March, and the headline figure was the lowest since July to September 2014 apart from during the pandemic. The Office for National Statistics ( ONS ) said the fall was mainly due to smaller firms who were struggling to cope with higher labour costs. Labour has increased employers' national insurance, raised the minimum wage and added more workers' rights. ONS deputy director of labour market statistics, David Freeman, said: 'While the labour market remains broadly flat in 2026, data from the latest quarter shows the employment rate edging up and a small drop in unemployment. 'The number of workers on payroll remains slightly down over the same period, though data for the most recent month suggests that might be starting to level off. 'The number of vacancies has seen its largest fall since the start of the year, concentrated mainly within smaller businesses, which cite increased labour costs as a key factor. 'Regular wage growth remained relatively stable, though total pay – including bonuses – has eased to its lowest rate in nearly six years.' The closely-watched vacancies metric showed they had dropped 21,000 to 691,000 in the three months to September Your browser does not support iframes. The UK average regular earnings growth rate as a three-month average, seasonally adjusted PM Andy Burnham and Chancellor John Healey at the Labour Party conference last month The new data come after a Confederation of British Industry survey last week found rising labour costs and employment regulations were making it harder for companies to create job and training opportunities. Businesses have been pleading with the Chancellor not to increase their burden again in his fiscal package on October 28. It is understood Mr Healey will stop short of hiking capital gains tax, despite a clamour from the Labour Left, including some senior ministers. However, he is widely expected to hit banks as he scrambles to shore up the public finances amid the Middle East crisis. The ONS said that following decreases since late 2013, the unemployment rate increased at the start of the coronavirus pandemic in 2020. From early 2021, it dropped to below pre-pandemic rates until mid-2022 – but the rate has been largely increasing since. The number of people that were unemployed for up to six months, and between six and 12 months, decreased over the year and on the quarter. The number of those employed for over 12 months rose over the year and in the latest quarter. The ONS said the decrease in the number of people unemployed over the year was the result of a fall in the number of unemployed women. Suren Thiru of ICAEW said: 'The UK labour market is running on idle, with employers still limiting recruitment and pay awards in response to surging cost pressures and pre-Budget policy uncertainty. 'While weak wage growth should reassure rate-setters that the Iran-driven energy shock is not yet fuelling a broader inflation spiral, it also means the cost-of-living squeeze persists, increasing pressure on the Chancellor to act in next week's Budget. 'The continued fall in vacancies is a flashing red warning light for the labour market, suggesting that a damaging side effect of this year's AI-fuelled economic growth has been weaker hiring demand, compounded by elevated employment costs. 'The UK jobs market is facing a tougher end to the year with unemployment likely climbing back above 5 per cent as the financial squeeze from rising energy costs and greater automation restrains hiring, particularly if the Budget brings further tax hikes.' The unemployment rate estimates the number of people without a job who have been actively seeking work within the last four weeks and are available to start work within the next two weeks. The rate is not the proportion of the total population that are unemployed. Your browser does not support iframes. It is the proportion of the economically active population - meaning those in work plus those seeking and available to work - who are unemployed. Shadow Chancellor Andrew Griffith said: 'You can't get people into work if there are no jobs for them to go to. 'Labour's Jobs Tax, endless red tape and John Healey's refusal to rule out yet another tax grab in his Budget are having devastating consequences for anyone who needs a job. 'Instead of kicking the can down the road with ever-higher taxes, John Healey must use his Budget to tackle the youth jobs emergency. He must back Conservative plans to halve the Jobs Tax for young people and scrap the job-killing measures in Labour's Unemployment Act. It is the only way we will get people working again.' Work and Pensions Pat McFadden said: 'Today's figures show the resilience of our labour market with unemployment falling and the UK's employment rate now the third highest in the G7, despite a backdrop of global uncertainty. 'But too many young people still find themselves locked out of employment. That's why are working with industry, to bring young people back into the labour market and prevent them from drifting into the welfare system. 'The hospitality and retail sectors have committed to 200,000 jobs for young people not in education, work or training through this partnership, to give them the opportunities they need to get started and build a successful career.'