Average yearly pay rises are holding firm even though other labour market indicators are less robust, ONS figures out today (11 June 2024) have shown.
Annual growth in regular earnings (excluding bonuses) was 6 percent for February to April 2024, which was the same as for the previous three-months.
When bonuses are included pay growth drops slightly to 5.9 percent, which was also the same as the previous three-months.
Unemployment up
Real terms pay growth, adjusted for inflation, was lower at 2.3 percent without bonuses. For total pay it was 2.2 percent. The ONS calculated this using the Consumer Prices Index including owner occupiers’ housing costs (CPIH) inflation measure, which was 3 percent in April 2024, down 0.8 percentage points from March.
Unemployment rose to 4.4 percent for February to April 2024, up 0.5 percentage points from a year earlier. The number of job vacancies in March to May 2024 was 904,000, representing a decrease of 12,000 or 1.3 percent from December 2023 to February 2024.
Job vacancies were down 156,000 (14.7 percent) year on year for March to May 2024. Although the ONS said they remained 108,000 (13.6 percent) above pre-pandemic levels.
Economic inactivity was estimated at 22.3 percent for February to April 2024, up 0.3 percentage points from the previous quarter.
‘Pay defies gravity’
Jon Boys, senior labour market economist for the CIPD, said: “Taken in the round the figures suggest that the labour market continues to cool but it’s a slow and gradual process.
“Unemployment and inactivity have edged up. However, unemployment remains at what is historically a very low level. Vacancies continue their long-term downward trend. This reflects that there is less churn in organisations than there was immediately after the pandemic and therefore a lesser need to hire to replace lost staff.”
He said that pay “continues to defy the gravity of a cooling labour market”, which combined with lower inflation is helping to alleviate cost-of-living challenges.
“Big economic shocks like a pandemic require a quick response and innovative solutions but the slow and steady labour market we now find ourselves in gives employers and policymakers time to react. The big challenges of the next decade such as pursuing net zero and providing public services will require a focus on the workforce. The economy will need not only a larger workforce but also one equipped with the right skills. This will require a joined-up response that looks at immigration, education and skills policy, and health.”
Relief for workers
Resolution Foundation principal economist Nye Cominetti said it was worrying that UK employment, at 74.3 percent down 1.1 percentage point from a year ago, is closer to its mid-pandemic lows than its pre-pandemic highs.
“Turning around this poor performance, and kickstarting the kind of jobs growth Britain experienced in the 2010s will be a key task for the next government.
“But while the jobs market weakens, pay packets remain resilient. This recent spurt of real wage growth, the strongest in almost a decade, will be a relief to workers and a worry for the Bank of England. But it can’t be sustained unless productivity picks up.”
Dismal employment stats
Tony Wilson, director at the Institute for Employment Studies, said: “The last parliament has been truly dismal for employment, and today’s figures are the worst that we have seen since the pandemic. For the first time since Thatcher’s first term, the number of people in work has fallen, down by around 40,000 since Boris Johnson’s victory.
“By comparison, employment grew by nearly four million between 2010 and 2019, and by nearly three million across Labour’s three terms (which included the great financial crisis). This parliament has also seen the largest rise in economic inactivity and largest contraction in the size of the workforce since comparable records began in 1971. And this just isn’t happening in other countries, with the UK virtually the only developed economy where the employment rate has fallen since the Covid-19 pandemic.
“We need to address this urgently, because when employment stops growing the economy stops growing too. Reforming employment support needs to be a top priority for the next parliament, so that more people can get access to the help that they need to get back into work and get on in work.”
