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Record employment and wages surge, but inflation dampens outlook
There were an estimated 30 million people in employment in May while pay rose 7.2% in the three months to April, official statistics reveal. However, workers are still worse off due to inflation.
The UK employment rate was estimated at 76%, with an additional 23,000 people in work in the month to May, pushing the total figure at 30 million, according to the Office for National Statistics (ONS).
It said the number of people in employment increased to a record high in the latest quarter, with both PAYE employees and self-employed workers seeing numbers swell.
Growth in average total pay, (including bonuses) was 6.5% while growth in regular pay (excluding bonuses) was 7.2% – the largest – growth rate seen outside of the pandemic.
However, once adjusted for inflation (real terms), growth in total and regular pay fell 2% and 1.3% respectively.
Rosie Hooper, chartered financial planner at Quilter, said: “Wages continue to rise, but despite this, workers are still 2% worse off in real terms due to persistently high inflation in the UK. The continued rise in wages, fuelled by private sector wage growth, will increase pressure on the Bank of England to up interest rates again next week.”
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She added that continued strong pay growth “is a consequence, rather than a cause”, of high inflation.
“However, while inflation has fallen from its stubborn double-digit highs for the first time in seven months, it remains eye-wateringly high, preventing many workers from fully benefiting from a boost to their income through pay increases.”
Unemployment, vacancies and strikes
Meanwhile, the unemployment rate increased 0.1 percentage points on the quarter to 3.8%, and the economic inactivity rate decreased to 21%. The ONS noted that the decrease was largely driven by those looking after family or home, but those inactive because of long-term sickness increased to a record high.
Turning to vacancies, the number fell by 79,000 to 1,051,000 – the 11th consecutive time “reflecting uncertainty across industries as survey respondents continue to cite economic pressures as a factor in holding back on recruitment”.
Elsewhere, there were 257,000 working days lost because of labour disputes in April.
Myron Jobson, senior personal finance analyst at Interactive Investor, said: “The UK labour market has displayed remarkable strength and resilience in the face of an uncertain economic backdrop during the three months to April 2023, with the employment level back to where it was before the Covid-19 pandemic.
“However, the labour market remains tight. While inactivity is on the wane, a new record level of long-term sickness and fewer job vacancies is weighing on economic growth. The seemingly shrinking pool of people with a particular set of skills has forced employers to pull out all the stops to attract and retain talent.”