Wage growth in the UK experienced a slight slowdown over the summer months, with new data revealing an average growth rate of 4.7% in the three months leading up to August, a decrease from the previous rate of 4.8% in July. This information comes from the Office for National Statistics (ONS), which also noted a marginal rise in the national unemployment rate from 4.7% to 4.8%. Analysts suggest that this trend indicates a stabilizing job market following a period characterized by significant fluctuations.
Job vacancies also saw a decline, dropping by 9,000 or 1.3% in the three months up to September. This marks the 39th consecutive period in which job openings have decreased compared to prior quarters. Liz McKeown, ONS’s director of economic statistics, commented on the situation, stating, “After a long period of weak hiring activity, there are signs that the falls we have seen in both payroll numbers and vacancies are now levelling off.”
Notably, the increase in unemployment appears to be primarily affecting younger individuals within the workforce. While there was a quarterly reduction in the number of economically inactive individuals due to student status or retirement, this was counterbalanced by a rise in inactivity for other reasons, including long-term illness. Danni Hewson, head of financial analysis at AJ Bell, highlighted the plight of younger workers, pointing to government policies like the recent increase in employer national insurance, which she claims has made it more challenging for employers to hire part-time staff—many of whom are young workers exploring the job market. She warned that these obstacles could significantly influence how these individuals perceive work in the future.
Despite these challenges, the ONS reported annual growth in average earnings of 6% in the public sector and 4.4% in the private sector. While the growth in private sector earnings is the slowest seen in four years, it remains above inflation. The public sector’s annual growth rate may also be impacted by some pay rises scheduled for earlier payments in 2025.
Chris Hare, a senior UK economist at HSBC, described the current labour market conditions as “fairly steady,” noting a general soft demand for labor in the economy. This stability may lead to a gradual easing of cost pressures within the labor market and a subsequent easing of wage growth, which could bring about long-term benefits for employers and employees alike. The number of redundancies also increased, rising to 3.8 per 1,000 employees during the June to August period compared to the previous year.
In a related note, the ONS revised its earlier wage growth figure from 4.7% to 4.8%, a number that will potentially play a role in determining the increase in state pensions for the upcoming year due to the government’s triple lock policy, which ensures pension increases based on the highest of wage growth, inflation, or a minimum of 2.5%.
The current climate presents both challenges and opportunities, as the job market adapts to new realities. With strategic adjustments, there is hope for increased stability and growth moving forward.