Pay growth continued to outpace inflation in autumn 2023, but at a slower rate than seen earlier in the year, official figures have shown.
Annual growth in employees’ regular earnings excluding bonuses in Great Britain was 6.6% in September to November 2023, while average total earnings including bonuses grew by 6.5%, according to the Office for National Statistics’ January 2024 labour market figures.
When adjusted for inflation measured by the consumer prices index, regular pay rose by 1.4% compared with a year earlier and total pay increased 1.3%.
There were signs of a struggling labour market in October to December 2023, when the estimated number of vacancies in the UK fell to 934,000, down by 5% from July to September.
This was the 18th consecutive quarterly drop in job openings, the longest run of quarterly falls ever recorded by the ONS, but this period is traditionally a quieter time for recruitment activity.
Only four industry sectors saw quarterly percentage growth in their average vacancies from July to September 2023: real estate, administration and support, construction and finance and insurance.
The number of employees on payrolls decreased by 24,000 to 30.2 million in December 2023, although the ONS said this figure should be treated as provisional.
Despite the drop in vacancies, the UK unemployment rate in September to November was largely unchanged at 4.2%. The employment rate rose just 0.1 percentage points to 75.8%, while economic inactivity dropped 0.1 percentage points to 20.8%.
January 2024 labour market
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Jon Boys, senior labour market economist for the CIPD, was upbeat about the picture the figures presented. “The steady state of the labour market is a reason to be cheerful in an uncertain world.
“Although wage growth has peaked, falling inflation means we are experiencing real growth, boosting people’s spending power. Unemployment remains low, meaning that most people who have access to the job market could secure a job,” he said.
However, he warned that the headline figures disguise major challenges including long-term sickness and the impact of plans to restrict immigration to tackle skills shortages.
“Every week a new report claims that automation and AI will be doing the heavy lifting soon, but there are limits to what a large language model can do for more frontline industries like health and social care or hospitality. The UK needs a plan to boost productivity in these sectors, also known as the everyday economy, if we’re to really see the dial shift on business performance and productivity,” he said.
The CBI’s future of work director Matthew Percival said many businesses were struggling to hire the people they need, leading to higher employment costs that are putting pressure on prices.
Every week a new report claims that automation and AI will be doing the heavy lifting soon, but there are limits to what a large language model can do for more frontline industries like health and social care or hospitality.” – Jon Boys, CIPD
“Difficulties hiring staff is still a drag on investment as firms redeploy funds to meet the short-term imperative of attracting the people they need, rather than prioritising long-term investment. That’s why businesses welcome steps to help more people into work, but reducing the availability of visas for skilled workers pushes in the opposite direction. An honest conversation about immigration would focus on how visa rules best support economic transformation and sustainable growth, beyond short-term fixes,” he said.
Julia Turney, partner at independent consultancy Barnett Waddingham, said: “After months of talk about a looming recession we can take some comfort that job losses aren’t surging, but it’s clear we’re still far from reaching stability in the labour market. Most notably, employers are continuing to navigate turbulent waters around employee wage increases while trying to answer the question of whether they should mandate a return to the office.
“People are continuing to take a needs-based approach to choosing a job – selecting their future roles based on an employer’s values, financial support and the benefits they can offer beyond salary. With this in mind, reinvigorating the jobs market will therefore require a degree of employers listening to their staff while gathering data to understand their business priorities.”
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