Unemployment has fallen unexpectedly while wage growth continues to slow, new figures from the Office for National Statistics (ONS) have revealed.
The latest official labour market data showed that unemployment was down to 4.2% in the quarter to the end of June from 4.4% in the previous quarter.
Pay growth excluding bonuses is the weakest it has been for two years, increasing to a yearly rate of 5.4%. This figure has dropped from the 5.8% reported a month earlier, according to the ONS UK labour market bulletin for August 2024.
But when factoring in inflation, wages increased by 1.6%, meaning many employees will see their standard of living continuing to improve.
UK unemployment rates
Unemployment unexpectedly climbs as wage growth holds
Commenting on today’s labour market figures, ONS director of economic statistics Liz McKeown said: “Basic pay growth, while remaining relatively strong, continues to slow. Growth in total pay slowed markedly, with last year’s one-off NHS bonuses affecting the comparison.
“There was a fall in the unemployment rate, which is now lower than a year ago. Meanwhile, there was a modest increase in both the total numbers of people in employment and the number of employees on payroll in the latest quarter.
“However, the medium-term picture remains somewhat subdued with the employment rate still lower than a year ago and the growth rate in the number of payrolled employees having slowed over the year.”
McKeown added that the number of job vacancies is still falling, although the total remains higher than the pre-pandemic levels.
James Cockett, senior labour market economist for the CIPD, said: “Today’s labour market figures show that pay growth remains high despite slower growth being recorded than in previous months. This quarter unemployment has unexpectedly fallen, which could put further pressure on wages.
“Vacancies have now fallen for 25 consecutive months yet remain above pre-pandemic levels as many employers continue to have difficulties in recruiting. Together, these figures highlight the importance of the government consulting closely with the business community to ensure that planned changes to workers’ rights don’t undermine the flexibility of the labour market and employment opportunities for workers.
“Policymakers will have been awaiting the figures with keen interest as the labour market is a key priority for the new government as outlined in its Plan to Make Work Pay. Equally, there is an important role for government to help more people get into work. Falling unemployment is a step in the right direction. Sustaining this progress will require employers to support the long-term unemployed and inactive by offering training and flexibility. Workplace adjustments are required to ensure those with health conditions can return to and stay in work.”
Julia Turney, partner and head of platform and benefits at Barnett Waddingham, said: “The UK labour market continues to face persistent challenges as the country continues to deal with an ageing, disengaged, and economically inactive population. And in June, the economically inactive – the number of working-age people not actively looking for work – rose to a whopping 9.41 million across the UK; a 350,000 increase from 2023.
“The workforce we are dealing with today is older, increasingly remote, and more in touch with mental health challenges than ever before. In fact, earlier this year Mental Health UK found that in the past year, one in nine UK adults had experienced high levels of stress that contributed to them also taking time off work during that period.”
Turney believes that if the government’s ambitious goal of rebuilding the country and strengthening the labour market is to be met, these issues must be tackled “head-on”.
She added: “This will not only require a concerted effort in promoting wellbeing and resilience in organisations across the country, but targeted support from the government to reduce the economically inactive, and get us back on track.”
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