The labour market may be cooling but real pay has grown giving employees “an increase not seen since the post pandemic bounce back two and half years ago”, said CIPD senior labour market economist Jon Boys.
The latest Office for National Statistics (ONS) figures show that while payrolled employees increased by 352,000 (1.2 percent) year on year for February 2024, estimates for March 2024 show this increase is slowing. For March 2024, the number of payrolled employees increased by 204,000, a rise of just 0.7 percent compared to a year ago.
Employment rates dropped to 74.5 percent for February 2024 down 0.8 percentage points from a year ago. Unemployment reached 4.2 percent in February 2024 up 0.3 percentage points from a year ago.
Job vacancies for January to March 2024 dropped by 13,000 from the previous quarter to 916,000. ONS said vacancies had fallen on the quarter for the 21st consecutive period but are still above pre-coronavirus (COVID-19) pandemic levels.
CIPD’s Boys said: “With unemployment up and employment down, today’s statistics show a cooling labour market. Other evidence of cooling includes the continued fall in vacancies, and an uptick in the redundancy rate. Taken together, this will ease pressure on recruitment and retention. It may also lead to the Bank of England cutting the base rate sooner.”
ONS figures also revealed employees’ average regular earnings (excluding bonuses) had increased 6 percent in December 2023 to February 2024, while annual growth in total earnings (including bonuses) was 5.6 percent.
However, when adjusted for inflation (using the consumer prices index including owner occupiers’ housing costs, CPIH) regular pay had increased by just 1.9 percent for the period from December 2023 to February 2024, while total pay increased 1.6 percent for the same period.
Boys said: “Falling inflation means robust real regular pay growth of 1.9 percent, unseen since the post pandemic bounce back two and half years ago. If real wage growth can remain positive, workers could start to claw back some of the purchasing power lost in recent times.”
Charlie McCurdy, economist at the Resolution Foundation, said the ONS data showed that Britain’s post-pandemic jobs recovery has “fallen further off course” with falling employment adding to the longer-term rise in economic inactivity.
People classed as economically inactive had risen to 22.2 percent up 0.6 percentage points from a year earlier. The redundancy rate grew to 3.9 percent up 0.8 percentage points from 2023. And the UK claimant count for March 2024 increased by 10,900 on the month and by 57,400 on the year to 1.583 million.
McCurdy said: “Rising redundancies and falling job levels are signs of a stagnant economy, while rising inactivity and long-term sickness suggest there are wider issues with the health of our workforce.
“Tackling rising inactivity – and its impact on the public finances, the benefits system, and people’s wider health and wellbeing – is one of the biggest economic challenges facing both this government, and whoever wins the next election.”
Tony Wilson, director at the Institute for Employment Studies, called the latest job figures “surprisingly poor”.
“However, most concerning is the rise in ‘economic inactivity’, which is the measure of those not in work but not looking for work, which is even higher now than it was in the depths of the pandemic,” he said.
“Overall there are nearly a million fewer people in the labour force than there were four years ago, and over a million fewer in work than there would have been if pre-crisis trends had continued. The trouble is that not enough people out of work are looking for jobs, rather than that people who are looking for jobs can’t find them. In other words, the weak labour market is holding back economic growth, not the other way round.”
He said that the government needs to move faster on rolling out the measures it announced last year to try to address this, including the new Universal Support programme and more investment in health, childcare and employment support.
Wilson said: “But we need to go much further than this too if we want to reverse these trends, by more fundamentally reforming how we reach and engage with people who are out of work, and in particular how we make our employment services more accessible, inclusive and supportive. We need to expect more from employers too, both to keep people in work and to improve access to work for those who may need more support.”
