The level of real pay for UK workers is rising at its fastest rate in more than two years despite a cooling of the labour market that has led to rising unemployment and falling job vacancies, the latest official figures show.
Those figures from the Office for National Statistics (“ONS”) showed the mild recession in the second half of 2023 has had an impact on demand for workers but has been slower to affect wages. The ONS said unemployment rose by 166,000 between the final quarter of 2023 and the first of 2024, pushing up the jobless rate from 3.8% to 4.3%. Employment fell by 178,000 over the same period, while further evidence of a cooling labour market came from a drop in job vacancies fell by 26,000 to 898,000 in the three months to April.
Today’s ONS figures (Tuesday 14 May) follow on the from last week’s news that the UK has emerged from recession. This was down to stronger than expected growth at the start of the year, as the economy grew by 0.6% between January and March, the fastest rate for two years. Prime Minister Rishi Sunak said the economy had "turned a corner", but Labour said this was no time for a "victory lap", presumably hoping such celebrations could occur when they win the next election. The governor of the Bank of England, Andrew Bailey, told the BBC last week that the UK was seeing a recovery, although it was not a strong one (first prize for stating the obvious there Mr Bailey).
The UK’s economic inactivity rate jumped to 22.1% in January to March, up from 21.9% in the final three months of 2023. The number of people inactive because of long-term health problems rose by 20,000 to 2,820,000 in the first quarter of 2024 – a new record high.
ONS figures for earnings showed total pay – including bonus payments – was 5.7% higher in the three months to March than a year earlier, unchanged on February. Regular pay, which strips out bonuses, was also unchanged, recording growth of 6%.
The chancellor, Jeremy Hunt, said: “This is the 10th month in a row that wages have risen faster than inflation, which will help with the cost-of-living pressures on families. And while we are dealing with some challenges in our labour supply, including pandemic impacts, as our reforms on childcare, pensions tax reform and welfare come online I am confident we will start to increase the number of people in work.” You can almost see the smugness can’t you?
Liz McKeown, the ONS director of economic statistics, said: “We continue to see tentative signs that the jobs market is cooling, with both employment from our household survey and the number of workers on payroll showing falls in the latest periods. At the same time the steady decline in the number of job vacancies has continued for a 22nd consecutive month, although numbers remain above pre-pandemic levels. With unemployment also increasing, the number of unemployed people per vacancy has continued to rise, approaching levels seen before the onset of Covid-19. Earnings growth in cash terms remains high, with the recent falls in the rate now levelling off while, with inflation falling, real pay growth remains at its highest level in well over two years.”
So over to you Mr Bailey and the Monetary Policy Committee. This one isn’t so easy, so how do you square that circle?
