UK pay growth drops sharply as job vacancies fall
Pay growth in the UK is falling sharply amid signs that jobs are becoming harder to find in a stagnant economy, the latest official data shows.
In its latest health check on the labour market, the Office for National Statistics said growth in total average earnings had dropped from 8% to 7.2% in the three months to October – a much bigger drop than the financial markets had been predicting.
Meanwhile, the number of job vacancies continued to fall, declining by 45,000 to 949,000 at a time when growth stalled.
The level at which pay is increasing is being closely monitored by Bank of England policymakers to gauge inflationary pressure in the economy and the latest figures will ease fears at Threadneedle Street of a wage-price spiral.
According to the ONS, total pay in the private sector was 7.2% higher in the three months to October than in the same period a year earlier. Public sector pay grew by 7.1%. Regular pay – which strips out the effects of bonuses – rose by 7.3% in the private sector and by 6.9% in the public sector.
Real pay, the difference between earnings growth and the level at which prices are rising, increased by just over 1%.
Problems with the Labour Force Survey have meant the ONS currently relies on alternative sources of information to assess the state of the UK’s jobs market.
These showed the employment and unemployment rates largely unchanged at 75.7% and 4.2% respectively.
Darren Morgan, the ONS director of economic statistics, said: “Our labour market figures continue to show a largely unchanged picture, with the proportions of people who are employed, unemployed or who are neither working nor looking for a job all little changed on the previous quarter.
after newsletter promotion
“Job vacancies fell again. This is now the longest period of decline on record, longer than in the immediate aftermath of the 2008 downturn. Nevertheless, the number of vacancies still remains well above its pre-pandemic level.
“While annual growth in earnings remains high in cash terms, there are some signs that wage pressure might be easing overall. However, as inflation has been falling more quickly, pay continues to grow in real terms.”
Ashley Webb, a UK economist at the consultancy Capital Economics, said: “The sharp fall in wage growth in October will probably further fuel investors’ expectations that interest rates could be cut as soon as the middle of next year, and leaves our forecast for rate cuts to start late in 2024 looking a bit more challenging.
“Overall, the labour market remains tight by historical standards, but the sharp fall in wage growth will reinforce the growing belief in markets that interest rate cuts will start sooner rather than later.”