UK Jobless Rate Increases While Wage Growth Decelerates

Official figures indicate that the UK’s unemployment rate has increased, coinciding with a continued deceleration in pay growth. The jobless rate reached 4.3% in the three months ending September, an increase from 4% in the preceding quarter. However, the Office for National Statistics (ONS) advised caution regarding the interpretation of its latest employment statistics, citing issues with its data collection methodology. While the pace of wage increases has moderated, salaries are still advancing more rapidly than inflation, which measures the rate of price escalation. Excluding bonuses, annual pay growth registered 4.8% between July and September, marking the lowest rate in over two years. The number of job vacancies also declined once more, a trend that has persisted for more than two years. Liz McKeown, the ONS’s director of economic statistics, highlighted that the total figure remains slightly above pre-pandemic levels. She informed the BBC’s Today programme that the most recent data suggested a “continued easing of the labour market”. Nevertheless, the ONS’s Labour Force Survey, which compiles UK job market data, has recorded a lower-than-usual number of respondents over the past year, raising concerns about its reliability. The Bank of England closely monitors employment data when making interest rate decisions. It implemented its second rate cut of the year last week, with inflation at 1.7%, below its 2% target. Ms McKeown stated that the ONS acknowledged that challenges with its figures were impacting the central bank and affirmed that efforts were underway to improve the data as swiftly as possible. The latest ONS statistics are corroborated by anecdotal reports indicating that some businesses, already contending with elevated costs, postponed hiring activities prior to the Budget. Supermarkets, including Asda and Sainsbury’s, along with High Street giant Marks and Spencer, have reported anticipating a significant rise in costs. This is attributed to the increase in National Insurance contributions (NICs) and minimum wage hikes effective from April, as outlined in Chancellor Rachel Reeves’ inaugural Budget. These tax increases have prompted concerns among businesses that they may need to scale back recruitment, limit staff wage increments, or raise prices. Although public sector pay awards authorized by the government will be reflected in official statistics throughout the remainder of the year, economists have cautioned that the upcoming rise in employers’ NICs could put pressure on the private sector. Alexandra Hall-Chen, principal policy adviser for employment at the Institute of Directors, commented that the provisions within the Employment Rights Bill and the tax increases are “taking a serious toll on hiring intentions”. She added, “The cumulative effect of these changes will ultimately be to stifle job creation… [the government] needs to urgently address business’ concerns about the increased risks and costs associated with employing staff.” Wendy Jones-Blackett, from Chapel Allerton, near Leeds, who specializes in designing and producing handmade greeting cards, informed the BBC that while her small business employs seven individuals, the companies she sub-contracts for printing and storage are likely to be more significantly affected by the government’s Budget decisions. She explained, “The thing that we’re having to build in is that their costs are going to go up – their services and the things that we buy.” She further stated, “It is going to make us question pay rises – if you want to retain good staff, you want to increase their pay. We want to do that but we’ll have to temper that with rising costs.” A separate survey recently conducted by the Recruitment and Employment Confederation and consultancy KPMG revealed that job vacancies decreased for the twelfth consecutive month, suggesting a diminished demand for workers. However, Rob Wood, chief UK economist at Pantheon Macroeconomics, asserted that the Bank of England would concentrate on major trends rather than “small data misses” by the ONS when deliberating its next interest rate decision. He commented, “Unemployment is likely gradually rising, the labour market is loosening but it remains tight.” He added, “Similarly, wage growth is gradually slowing but remains too high still to deliver inflation sustainably at target.” Other economists have indicated their belief that the most recent figures from the ONS would not prompt the Bank to opt for another rate reduction in December. Work and Pensions Secretary Liz Kendall stated that “more needs to be done to improve living standards”. The Labour MP mentioned that starting in April, three million of the lowest-paid workers are expected to benefit from an increase to the minimum wage, officially known as the National Living Wage. Copyright 2024 BBC. All rights reserved. The BBC is not responsible for the content of external sites. Read about our approach to external linking.