ONS figures out today (14 May, 2024) indicated that the UK jobs recovery is faltering but the big question is whether what remains of the recovery will be enough to sustain the country’s mini pay recovery.
This was a question raised by Nye Cominetti, principal economist at the Resolution Foundation, responding to the latest ONS figures.
Cominetti emphasised that while most major economies have already surpassed their pre-pandemic employment rates, the UK’s employment recovery has been flat or falling for the past six months.
The current employment rate of 74.5 percent for January to March 2024 remains below figures from a year ago, according to ONS data. It was also down from the quarter before.
The current 74.5 percent rate is closer to the pandemic employment low of 74.1 percent than the pre-pandemic rate of 76.2 percent, Cominetti commented.
Unemployment and economic inactivity rose year on year, with the unemployment rate for January to March 2024 at 4.3 percent. The economic inactivity rate for the first three months of 2024 was 22.1 percent, which is also above estimates for the same period a year earlier.
Job vacancies fell by 188,000 (17.3 percent) in February to April 2024 from the previous year, although they remained 102,000 (12.8 percent) above pre-pandemic levels seen in January to March 2020.
Cominetti said that Britain’s post-pandemic workforce has shrunk by the equivalent of one million workers, adding that the fall in employment isn’t just about lower participation as demand from employers is also weakening.
But this drop in employment has not yet fed through into pay packets, he said.
Real wages grew at a rate of 2 per cent in the twelve months to March 2024 – the fastest growth since September 2021. In fact, real wages have grown almost as much as in the past 12 months as they have done over the previous 16 years in total (2.1 per cent between February 2008 and February 2024).
“Britain’s jobs recovery continues to falter, with the workforce shrinking by the equivalent of one million workers since pre-pandemic times. This worrying employment fall shows the damage that an economic slowdown can cause,” Cominetti said.
“The news for those in work is more positive however, with real wages growing almost as much over the past 12 months as they did in the 16 years prior to this.
“The big question is whether the UK’s recent economic recovery will boost employment and raise output per worker, which will be needed to sustain its mini pay recovery.”
The CIPD said the ONS figures highlight an increasing disconnect between continued strong wage growth and the loosening labour market.
James Cockett, labour market economist for the CIPD, explained: “This is characterised by slowly rising unemployment and falling vacancies, against a backdrop of weakening inflation. These factors suggest the power in the labour market is gradually shifting from workers to employers and this may start to feed into lower pay growth over coming months.
“Nominal pay growth remains stubborn at 6 percent, unchanged on last month. Falling inflation means there has continued to be a rise in real regular pay growth, now at 2 percent. Vacancies are now below 900 thousand, but still above the pre-pandemic level. We expect this level to continue to fall in 2024.”
He cautioned against reading too much into the month-to-month changes in the employment indicators due to the current reliability of estimates.
“But, taken as a whole, all indicators continue to point towards a slowing jobs market. With more people staying put, it will be important for employers to invest in workplace skills to support and develop their existing workforce.”
He added: “Inactivity due to long term sickness also remains unchanged. More than one in five people who are inactive due to long-term sickness want a job, meaning more employers should focus on providing flexible working, reasonable adjustments and access to occupational health support. The data also highlights the importance of the new WorkWell pilots to enable employees to access support such as physiotherapy or counselling to help them remain in or return to work.”
