Rachel Reeves has dropped a broad hint that she plans to increase employers’ national insurance contributions as part of a package of measures in the budget. If the chancellor does go ahead with what is in effect a tax on jobs she will be doing so at a time when the labour market is clearly cooling.

Make no mistake, the labour market is in pretty good shape. There are a record number of people in work and the jobless rate stands at 4%. The 14 consecutive increases in interest rates between December 2021 and August last year have proved less damaging to jobs than expected.

That said, dearer borrowing costs have still had an impact and that has arrived – as it usually does – after a lag. The number of job vacancies fell by 34,000 between July and September – the 27th drop in a row and 36% below its peak in May 2022.

Meanwhile, the number of payrolled employees dropped slightly in September. The latest figures also suggest companies have put hiring on hold until they know what Reeves has in store on 30 October. The British Chambers of Commerce and the Institute of Directors have said businesses were particularly worried about a possible NI increase in the budget.

Slower earnings growth reflects weaker demand for labour. Annual total pay growth – including basic pay and bonuses – stood at 3.8% in the three months to August, down from 4.1% for July and less than half the 8% a year earlier.

Earnings growth in the three months to July was revised up slightly from the 4% provisional figure released last month. That will have a modest impact – of 20p a week – on the full state pension next year through the triple lock. This stipulates that the annual state pension increase is in line with whichever is highest of earnings, inflation or 2.5%. Given that inflation is currently 2.2%, the pension will go up in line with earnings next April to just over £230 a week.

For now, pay continues to rise faster than prices, which means workers are seeing their living standards increase. But as the Resolution Foundation thinktank has said, if the recent trend in earnings continues, Britain’s brief period of rising real incomes could soon come to an end.

A big part of the fall in total pay was due to hefty bonus payments for NHS and civil service staff in 2023 not being repeated this year, but growth in basic pay also fell – from 5.1% to 4.9%.

Regular private sector pay growth – a measure closely watched by the Bank of England – eased from 5% to 4.8%, so an interest rate cut next month looks ever more likely.