Growth in people’s average regular earnings slowed to 5.7% in the three months to the end of May, its slowest rate since August 2022.
July 2024’s labour market data from the Office for National Statistics showed average regular earnings (excluding bonuses) in Great Britain grew by 5.7% in the year to the March-May 2024 quarter, and annual growth in total earnings (including bonuses) was also 5.7%.
Annual growth in real terms – adjusted for inflation using the consumer prices index including owner-occupiers’ housing costs (CPIH) – for regular pay was 2.5% in March-May 2024, and for total pay was 2.2%.
The ONS labour market data shows that regular wages grew 3.7 percentage points above inflation in the year to May.
Yesterday the ONS published data showing the consumer prices index in June 2024 stood at 2.0%, higher than forecasts had predicted; CPIH also remained unchanged on the previous month at 2.8%; while the retail prices index (RPI) fell slightly to 2.9%.
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The UK employment rate for March-May 2024 decreased in the latest quarter to 74.4%; unemployment increased to 4.4%; and economic inactivity rate decreased to 22.1%.
However, ongoing challenges with response rates to the Labour Force Survey means the ONS has badged them as “official statistics in development” until further review.
Novo Constare, CEO of Indeed Flex, commented that the labour market continues to cool. “Job vacancies are falling and unemployment has ticked upwards for the fifth consecutive month,” he said.
“Overall, hiring has slowed and there are more people applying for fewer jobs, although highly-skilled and experienced candidates are still in demand in certain sectors. The pressure is on the new Labour government to turn the tide and reignite business confidence to boost job creation.
“The UK economy is showing signs of revival with faster-than-expected growth last month, while inflation is back within the Bank of England’s 2% target.”
Recruitment and Employment Confederation (REC) chief executive Neil Carberry said: “Today’s labour market numbers reflect the gentle slowdown that business surveys have been reporting for the past few months. Vacancies are now falling back to their pre-pandemic level, but the impact of last year’s high inflation is sustaining pay rates.
“The new government seems to appreciate the formidable challenges we face, including high economic inactivity and widespread skills mismatches. Yesterday’s announcements on UK-wide apprenticeship levy reform and the creation of Skills England are positive, though how the new English skills body is set up will define its success. Firms need more focus on local activity – not top-down bureaucracy.”
Carberry added that the government needs to be careful that its employment rights agenda does not stifle progress by protecting those in work at the expense of those looking for it.
“On skills and employment law, a proper partnership with business is necessary to make changes work effectively for all workers – especially the millions who want and choose to work flexibly and those in need of a new opportunity,” he added.
Matthew Percival, future of work director at the CBI, agreed: “Pay growth remaining relatively strong is a reminder that the Employment Rights Bill comes at a time that business already face significant employment cost pressures that are weighing on investment and pushing up prices.
“Businesses have a strong incentive to invest in productivity but the cost pressures they face are squeezing their budgets to do so. The government will need to carefully monitor the extent to which this makes delivering economic growth harder.”
Dr Helen Gray, chief economist at Learning and Work Institute, said: “Over the past year, the percentage of working-age adults who are in employment has fallen from 75.5% to 74.4%. The number of people aged 16-64 who are economically inactive has risen by 390,000, and an additional 133,000 people aged 16 or more are unemployed.
“We are calling on the new government to extend employment support to everyone who wants to work, including the 1.8 million people who are economically inactive but want a job. There also needs to be better coordination of work, health and skills services: currently, only one in 10 out-of-work disabled people get help to find work each year.”
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