Pay growth slowed as vacancies continued to fall, but the rate of wage growth was still above inflation in early autumn, official figures show.
The Office for National Statistics’ December 2023 labour market figures revealed that annual growth in regular weekly pay excluding bonuses was 7.3% in the August to October 2023 quarter, while annual total pay growth was 7.2%.
When adjusted for inflation using the consumer prices index including housing costs (CPIH), the average employee saw their regular pay rise by 1.3% and their total pay rise by 1.4%. In August and September CPIH was 6.3%, but fell to 4.7% in October.
Annual average regular earnings growth for the public sector was 6.9% in August to October 2023, and is among the highest regular annual growth rates since comparable records began in 2001. In the private sector, it was 7.3%.
The finance and business services sector saw the largest annual regular growth rate at 8.3%, followed by the manufacturing sector at 7.4%.
Although many of the labour disputes over pay and conditions seen over the past year and a half have been resolved, some 131,000 working days were lost to strikes in the UK in October 2023. Three-fifths of these were in the health and social work sector, the ONS said.
Only 49,000 workers were involved in industrial action, the lowest number since June 2022.
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The estimated number of vacancies in the UK in September to November 2023 fell to 949,000, 45,000 fewer than the previous quarter and 229,000 fewer than a year ago. This was the 17th consecutive quarterly fall in vacancies, the longest run on record.
Most industry sectors, aside from mining and quarrying, saw a reduction in vacancies. The estimated number of vacancies in arts, entertainment and recreation contracted the most, falling by 19.9%.
Because of uncertainty around the accuracy of Labour Force Survey estimates, the ONS continues to publish an alternative set of estimates of employment, unemployment and economic inactivity, based on PAYE real-time information submissions and the benefit claimant count. These were largely unchanged in August to October 2023; the UK employment rate was 75.7%, the unemployment rate was 4.2% and the economic inactivity rate was 20.9%.
Job board Reed.co.uk said it had seen an 18% reduction in job postings this year compared with 2022 but has received 29% more applications, creating a more competitive market.
Chairman James Reed said: “Looking ahead to 2024, we anticipate this trend of an employer-led market to persist, with a sustained focus on strategic hiring decisions and talent acquisition. A rise in applications across the board is indicative of the richness of talent available to employers, making it a good time for them to take advantage of this and bolster their workforce.
“Based on current economic forecasts, we don’t foresee another major turn in the labour market. Although, the Bank of England’s anticipation of slowing inflation provides a positive outlook for wages.”
Recruitment and Employment Confederation chief executive Neil Carberry said he expected pay awards to reduce further over the coming months.
Pay pressures are receding. We expect that to continue as the high pay settlements paid by employers in 2023 fall out of the data over the next six months.” Nail Carberry, REC
He said: “The labour market is clearly slowing, but employment is being underpinned by the fact that labour supply is so tight.
“Today’s data reflects emerging trends from our monthly Report on Jobs that pay pressures are receding. We expect that to continue as the high pay settlements paid by employers in 2023 fall out of the data over the next six months.”
Ben Harrison, director of the Work Foundation at Lancaster University, said he expected the strong levels of wage growth to subside quickly in the New Year because of the limited number of vacancies.
“This could be particularly bad news for workers in sectors such as construction, where pay growth is only just above inflation,” he said.
Harrison was disappointed that the new method of presenting inactivity figures did not give any insight into the levels of inactivity due to long-term sickness, which in September hit a record 2.6 million people.
He said: “Given new measures could see benefits withdrawn from those with long-term health conditions and disabilities if they are unable to find a job within 18 months, it is vital the Office for National Statistics revert to normal service so the impact that both the rhetoric and policy measures have on some of the most vulnerable people in society can be analysed.”
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