The UK has recorded its second largest fall in real wage growth since records began more than 20 years ago, in addition to yet another drop in job vacancies, new data has revealed.
The Office for National Statistics (ONS) reports that, in real terms, (adjusted for inflation) over the year, total and regular pay both fell by 2.7%; this is slightly smaller than the record fall in real regular pay we saw in April to June 2022 (3.0%) but still remains among the largest falls in growth since comparable records began in 2001..
The UK employment rate for August to October 2022 increased by 0.2 percentage points on the quarter to 75.6% but is still below pre-coronavirus pandemic levels.
In September to November, the estimated number of vacancies fell by 65,000 on the quarter to 1,187,000. Despite five consecutive quarterly falls, the number of vacancies remains at historically high levels. The fall in the number of vacancies reflects uncertainty across industries, as respondents continue to cite economic pressures as a factor in holding back on recruitment.
The ONS also reported 417,000 working days lost because of labour disputes in October, which is the highest since November 2011.
The fall in vacancies suggests employers are tapping the brakes on hiring but are a long way off shifting into reverse, says the CIPD.
Jonathan Boys, CIPD’s labour market economist, said: “The fifth consecutive quarterly fall in job vacancies shows that employers are tapping the brakes but are a long way off from heading into reverse. It takes months to recruit, so vacancies are a good leading indicator of what’s coming around the corner. A recession may take some of the heat out of labour demand for some sectors, but sectors like health and social care are unlikely to be one of them, as pressure on the NHS continues to build.
“Few people are seeing their pay keep up with rising prices as real earnings are down 2.7%. Although inflation may have ‘peaked’, even as it comes down prices will still be going up. The cost-of-living crisis has some time to run yet. The Bank of England is likely to raise rates again on Thursday which will further thump the finances of householders with mortgages.
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“Pay continues to be at the centre of continued industrial strife, with 417,000 days lost to industrial action in October and more expected over the festive period. For most of the last 20 years, public sector employees have earned more than their private sector counterparts. This reversed in 2021 and the gap between the two has now grown to £21 a week or £1,093 a year. With private sector regular pay growing by 6.9% in the year to August-October compared to 2.7% in the public sector, this gap is set to widen further. The challenge will be for employers to do what they can to support their staff through a cost-of-living crisis at the same time as the cost of doing business is rapidly rising.”
Lauren Thomas, Glassdoor's UK Economist, shares her thoughts on December's ONS Labour Market update. She commented: “Employees appear increasingly concerned about layoffs, with discussion on Fishbowl by Glassdoor up 440 percent year-over-year in November. However, the gap between public perception and employees’ actual experience of redundancies seems to be widening; ONS data shows that redundancies are still below their pre-pandemic average.
“With wages falling in real terms, inflation and economic concerns remain top of mind for employees. Mentions of these terms in last month’s Glassdoor reviews increased over ten times from November 2021. Meanwhile, maintaining staff levels and productivity all while weathering an uncertain economy is the priority for employers.
“One bright spot in the economy is healthcare, which remains a safe haven for workers even as job vacancies in other industries have begun to fall. Between growing demand for healthcare services from an ageing population and an acute shortage of workers, healthcare has historically proven a safe bet for workers looking for stability.”
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Jack Kennedy, UK Economist at the global job site Indeed, commented: “The final ONS update for 2022 provided mixed news on the labour market. Employment was up on the quarter, driven by an increase in employees, as self-employment declined. Vacancies softened, but remain elevated at 1.19 million.
“There was also a noteworthy 41,000 drop in economic inactivity among the key 50-64 age group, with evidence of some people returning to the labour force from retirement. That may be an early sign of cost-of-living pressures prompting some people to rethink their plans. However, overall inactivity remains more than 560,000 higher than pre-pandemic levels and continues to fuel recruitment challenges across a range of sectors.
“Pay data highlighted one of the largest disparities in wage growth between the public and private sectors we’ve seen to date: 6.9% y/y in the private sector and 2.7% y/y in the public sector. This is an interesting sign of the times as we acknowledge strikes across healthcare, transport and distribution. In fact, in October we saw the highest number of working days lost due to labour disputes since 2011 as the UK economy struggled to recover following the financial crash.
“Despite the strongest growth in nominal pay (6.1% y/y) we’ve seen outside the pandemic period, real terms pay continues to be squeezed considerably by high inflation, with total and regular pay both falling by 2.7% y/y, one of the largest declines on record.”
