Real-terms annual pay growth fell by 2.6% in the period from September to November, making it among the largest falls in growth since comparable records began. Elsewhere in the latest jobs data for January 2023, economic inactivity has slowed slightly.
Not adjusted for inflation, the rate of annual pay growth hit 6.4% – both regular pay and total pay including bonuses – its highest rate outside the pandemic period.
According to the labour market statistics from the Office for National Statistics (ONS), average regular pay growth for the private sector was 7.2%, and 3.3% for the public sector.
The finance and business services sector saw the largest regular growth rate at 7.6%, followed by construction at 6.3%.
In real terms (adjusted for inflation), in September to November 2022, total pay fell by 2.6% on the year. A larger fall was last seen in a period in 2009, when it fell 4.5% on the year.
Real-terms pay growth
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Regular pay fell by 2.6% on the year, by less than the record seen in April to June 2022 (3.0%), but still among the largest falls seen since comparable records began in 2001.
The ONS’s real-terms pay figures use the consumer price index including owner-occupiers’ housing costs (CPIH) to calculate the cost of living. Using CPI without housing costs total pay fell 3.9% in the year to September-November, and regular pay fell 3.8%.
“The real value of people’s pay continues to fall, with prices still rising faster than earnings,” said Darren Morgan, ONS director of economic statistics. “This remains amongst the fastest drops in regular earnings since records began.”
The number of job vacancies in October to December 2022 was 1.161 million, a decrease of 75,000 on the previous quarter. Quarterly growth fell for the sixth consecutive period to -6.1% from October to December 2022, with vacancies falling in 14 out of 18 industry sectors.
Vacancies remain 365,000 higher than the pre-pandemic levels recorded from January to March 2020. Industry sectors displaying the largest falls in vacancy numbers were health and social work, down 12,000; and the trade and repair of motor vehicles, down 11,000 on the quarter.
The UK employment rate was estimated at 75.6% from September to November 2022, largely unchanged compared with the previous quarter and 1.0 percentage points lower than before coronavirus (December 2019 to February 2020).
The unemployment rate for September to November 2022 increased by 0.2 percentage points on the quarter to 3.7%. The number of people unemployed for up to six months also increased, driven by those aged 16 to 24 years.
But economic inactivity decreased by 0.1 percentage points on the quarter to 21.5% in September to November 2022, driven by people aged 16 to 24 years and those aged 50 to 64 years. The main reasons for inactivity included studying, long-term sickness and retirement.
Matthew Percival, the CBI’s director for people and skills, said: “The continued evidence of younger and older workers returning to employment is welcome news. There are early signs of softening in the labour market, but many businesses are still struggling to hire and record pay growth is not yet easing the cost-of-living crisis.”
“The government needs to pull every lever to ease shortages and strengthen the case for the business investment that is needed to drive growth and living standards. This means helping more people to overcome the barriers like the cost and availability of childcare or ill-health that are preventing them from working, and updating the Shortage Occupations List.“
Katie Elliott, director at St Albans-based HR specialists, HR Katie: “After the candidate-driven market of the past two to three years, things are definitely swinging back more in favour of employers. HR is likely to be under more pressure this year, as both employers and employees will be feeling the squeeze on salaries.
“Average salaries are being hit by a sledgehammer in real terms. It’s going to be a key time for companies to really focus on employee wellness, as people trust their employer far more than the government. Better education around finances and spending, promoting flexibility around caring arrangements and mental health support across all sectors are likely to be welcomed as lower-cost alternatives to blanket pay increases.”
Redundancies increased to 3.4 per thousand employees from September to November 2022, but remain low.
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