The UK labour market is generating fewer jobs, but is paying out more to those who do have one a review has found.
The number of unemployed people in the country in the first three months of the year increased to the rate of 4.3 percent, the highest since May to July 2023.
The ONS also reported a 2.8 percent drop in the number of vacancies from November 2023 to January 2024. Thirteen out of the 18 industry sectors saw a decrease in vacancies in February to April 2024.
However, pay rises, excluding bonuses, went up to 6 percent. Regular real pay, which is adjusted for inflation, was two percent, while total real pay was ay 1.7 percent in January to March.
Liz McKeown, director of economic statistics at the ONS, said that “real pay growth remains at its highest level in well over two years.”
Secretary of State for Work and Pensions Mel Stride said that ONS figures represented a resilient labour market.
Jobs Market
The jobs market shows “tentative signs” of cooling, Ms. McKeown said, with both employment and the number of workers on payroll showing falls in the latest periods.In the reported period of February to April, there were an estimated 898,000 vacancies, a decrease from 26,000 from the previous quarter.
The largest fall was recorded in manufacturing, which was down by 7,000 vacancies. Human health and social work sectors saw a decrease of 33,000 vacancies, while only real estate activities enjoyed a surge on the previous year, up by an estimated 4,000 vacancies.
The ONS reported 1.6 unemployed people per vacancy, an increase from 1.4 in October to December 2023.
“Although this ratio remains low by historical standards, it does demonstrate a slight easing in the labour market, with vacancies falling alongside rising unemployment,” the ONS said.
Economic Outlook
With wages outstripping inflation, the Bank of England (BoE) is likely to be guarded in the future regarding decisions on interest rates and the impact of wage growth on inflation hikes.Last week, the bank kept the interest rate at 5.25 percent and vowed to continue monitoring inflationary pressures and labour market conditions.
Following two consecutive quarters of negative growth in 2023, the UK has recovered from the technical recession after it grew by 0.6 percent in the first three months this year.
“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,” according to the Resolution Foundation think tank.
The ONS reported an employment rate 74.5 percent, which remains below the estimates of a year ago.
“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.”
Economists at the National Institute of Economic and Social Research (NIESR) expect wage growth to remain high by historical standards “amidst the minimum wage hike in April, still tight labour market and stronger than expected economic recovery.”
“However, falling vacancies relative to unemployment indicates that the labour market continues to cool, hinting an easing of wage pressures in Q2 2024,” added Monica George Michail, economist at NIESR.
