New figures suggest that wages are outpacing inflation for the first time in 18 months.
The most recent employment data from the Office for National Statistics (ONS) shows wages increased 7.8% compared to the same time last year.
This figure was ahead of the consumer price index (CPI) measure of inflation for the month of July, which eased to 6.8%, suggesting that UK wages are now outpacing the cost of goods and services.
Despite this, experts warn that many UK employees will still be feeling the pressures of the cost-of-living crisis, and spectators shouldn’t assume that workers are better off because of these figures.
Unemployment is rising
Figures continue to show rising unemployment rates, as this number increased from 4.2% to 4.3%.
The ONS suggested this rise is largely driven by people being unemployed for up to 12 months, and that a large portion of those who are inactive are suffering from long-term sickness, which increased to a record high.
Darren Morgan, ONS Director of Economic Statistics, commented: "Unemployment continues to increase in the latest three months. Correspondingly, employment is down, driven by falls among men and the self-employed."
“The proportion of people neither working nor looking for a job is slightly up, with more students, as well as the long-term sick reaching yet another record.”
"Job vacancies have fallen below the million mark for the first time since the summer of 2021, when the reopening of the economy created huge demand for workers. However, they still remain significantly above pre-COVID levels."
What does this mean for employers?
High unemployment rates paint a complex picture as employers are still struggling to fill positions and find the talent they need. There is more likely to be a larger pool of job seekers, and there are less job vacancies in the market, so employers might face less pressure to improve their offering to candidates, potentially reducing labour costs. In turn, this could give greater negotiating power to businesses when setting terms of employment.
But today’s figures also suggest that despite unemployment being high, these individuals aren’t employed or necessarily looking for work.
Bar Huberman, HR strategy & practice at XpertHR, says the solution to these skills gaps is looking internally: “Throughout the year, permanent hiring has slowed, and this can be attributed to the growing sense of economic uncertainty over the last 12 months, but another concern is the ability of organisations to fill positions with appropriately skilled individuals. Our survey found that over three-quarters of businesses grapple with candidate skills shortages and failing to address this head on will only lead to longer recruitment cycles in the future.
“During periods when the labour market is tight, we encourage our customers to turn their attention towards existing members of staff. It is all about a shift in mindset away from recruiting candidates to fill job vacancies, towards training current employees and broadening skillsets across the organisation. This approach will not only provide agility and save on recruitment costs, but by placing an emphasis on learning and development businesses will see a marked improvement in employee retention, avoiding vacancy challenges in the future.”