UK wage growth slows as jobs market cools – business live
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UK wage growth has slowed, and vacancies have dropped again, as Britain’s labour market cools in the face of a weak economy and high interest rates.
New data just released by the Office for National Statistics show that average basic pay (excluding bonuses) grew by 7.3% per year in the August-October quarter. That’s down from 7.8% growth a month ago.
Including bonuses, pay growth was slightly slower – up 7.2% year-on-year. Again, that’s quite a slowdown on the 8% total pay growth a month ago, and a larger fall than expected.
Wages are still rising faster than inflation, though. In real terms, both basic and total pay grew by 1.2% – once you account for rising prices.
But today’s data suggests the jump in nominal wage growth earlier this year is fading, just as households face the Christmas spending squeeze.
This may cheer the Bank of England as it prepares to set interest rates on Thursday, as it suggests that high borrowing costs are cooling the economy, and preventing a wage-price spiral breaking out.
Pay grew by 7.3% excluding bonuses, or 7.2% including bonuses, in the year to August to October 2023, slightly down on recent periods.
Annual average regular earnings growth for the public sector was 6.9% in August to October 2023, which is one of the highest rates since the ONS’s data began in 2001.
Annual average regular earnings growth for the private sector was 7.3%.
The ONS also reports that vacancies in the UK fell by 45,000 on the quarter to 949,000.
This is the 17th consecutive fall in a row – the longest run on record, but it still leaves vacancies above their pre-Covid-19 levels.
The number of vacancies in September to November 2023 was 949,000, down 45,000 on the previous 3 months.
They were down by 229,000 from a year ago, although they remained 148,000 above their pre #COVID19 pandemic levels.
‘This year the number of employees on payroll reached a record high in the UK Labour Market – up over 300,000 on the year’
‘Our transformational Back to Work plan with £2.5 billion will help thousands more people access the wide ranging benefits of work and boost our economy’.
That payroll total is estimated to have dropped a little in November, down 13,000, to 30.2 million – but this data is often revised by the ONS.
From HMRC’s PAYE RTI data, the number of employees on the payroll fell slightly, by 13,000, in November 2023.
This was still 333,000 up on the year and 1.183 million above its pre #COVID19 pandemic level.
Liz Kendall MP, Labour’s Shadow Work and Pensions Secretary, says:
“Today’s figures once again lay bare 13 years of Conservative economic mismanagement that is failing Britain.
We are the only G7 country with an employment rate that hasn’t returned to pre-pandemic levels and a record number of people are now locked out of work due to long term sickness. It’s bad for them, it’s bad for business and it’s bad for the taxpayer too.
Labour’s plan to get Britain working will tackle the root causes of economic inactivity by driving down NHS waiting lists, reforming social security, making work pay and supporting people into good jobs across every part of the country.”
Pay is growing fastest in the finance and business services sector, the ONS reports, where it rose by 8.3% in the August-October quarter.
That was followed by the manufacturing sector, where pay is up 7.4% year-on-year.
Richard Carter, head of fixed interest research at Quilter, says the Bank of England will want to see further cooling in wage growth before it starts to cut interest rates:
“This dip in pay suggests the Bank of England’s previous interest rate decisions are beginning to have the desired effect and it will likely feel vindicated to continue to hold rates higher for longer as a result.
Though today’s figures suggest another step has been taken in the right direction, the Bank will be keen to see a significant slowdown in wage growth before it begins to contemplate the possibility of cutting interest rates.
Today’s data suggests a looser labour market is starting to translate into slower pay growth, says Jake Finney, economist at PwC UK.
Finney predicts that this will encourage the Bank of England to leave interest rates on hold at their current 15-year high of 5.25%, saying:
“Despite slower pay growth, inflation-adjusted pay is still growing on a year-on-year basis. This is because headline inflation is falling back at a faster rate. Our modelling indicates that the worst of the living standards squeeze is over for the average household. However mortgaged households will continue to face the squeeze from higher interest payments as fixed-rate mortgages face renewal.
“Signs of labour market cooling will provide some reassurance to the Bank of England Monetary Policy Committee, who meet again on Thursday. With no major surprises in the economic data over the past four weeks, rates are likely to remain unchanged. Policymakers are expected to stress that rates will need to remain in restrictive territory for some time.”
The Chancellor of the Exchequer, Jeremy Hunt, has issued a brief statement outlining the government’s efforts to support employment:
“It’s positive to see inflation continue to fall and real wages growing.
At the Autumn Statement, I announced an ambitious set of measures to get more people into work and boost economic growth. This includes a significant expansion of health support and an over £9bn per year tax cut for employees and the self-employed, worth over £450 for the average worker,”.
ONS director of economic statistics Darren Morgan says there are signs that the pressure lifting UK earnings may be easing:
“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.
“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.”
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
UK wage growth has slowed, and vacancies have dropped again, as Britain’s labour market cools in the face of a weak economy and high interest rates.
New data just released by the Office for National Statistics show that average basic pay (excluding bonuses) grew by 7.3% per year in the August-October quarter. That’s down from 7.8% growth a month ago.
Including bonuses, pay growth was slightly slower – up 7.2% year-on-year. Again, that’s quite a slowdown on the 8% total pay growth a month ago, and a larger fall than expected.
Wages are still rising faster than inflation, though. In real terms, both basic and total pay grew by 1.2% – once you account for rising prices.
But today’s data suggests the jump in nominal wage growth earlier this year is fading, just as households face the Christmas spending squeeze.
This may cheer the Bank of England as it prepares to set interest rates on Thursday, as it suggests that high borrowing costs are cooling the economy, and preventing a wage-price spiral breaking out.
Pay grew by 7.3% excluding bonuses, or 7.2% including bonuses, in the year to August to October 2023, slightly down on recent periods.
Annual average regular earnings growth for the public sector was 6.9% in August to October 2023, which is one of the highest rates since the ONS’s data began in 2001.
Annual average regular earnings growth for the private sector was 7.3%.
The ONS also reports that vacancies in the UK fell by 45,000 on the quarter to 949,000.
This is the 17th consecutive fall in a row – the longest run on record, but it still leaves vacancies above their pre-Covid-19 levels.
The number of vacancies in September to November 2023 was 949,000, down 45,000 on the previous 3 months.
They were down by 229,000 from a year ago, although they remained 148,000 above their pre #COVID19 pandemic levels.