The latest analysis indicates that the average worker’s weekly earnings have only increased by £3.80 compared to a year ago, as per findings from the Resolution Foundation. Despite a rise in wages, the impact of escalating living costs has largely negated any financial gains for workers.
Furthermore, recent data from the Office for National Statistics reveals that the UK’s unemployment rate has climbed to 5.1% in the three months leading up to October, marking the highest non-pandemic level since 2016. Reports suggest that employers hesitated in hiring new staff prior to the recent Budget announcement, with additional concerns raised over a national insurance hike dampening demand for labor.
However, there is a glimmer of hope as the reduction in job vacancies has stabilized, hinting at potential future hiring activities by companies. Although wage growth has decelerated, average salaries are still managing to slightly outpace the rising cost of living.
In real terms, wage growth, factoring in inflation, saw a mere 0.5% increase in the three months up to October, according to the ONS. The Resolution Foundation highlights that over the past year, real average weekly earnings have only risen by £3.80, which they liken to covering the cost of a single cup of coffee.
The long-lasting impact of the 2008 financial crisis is evident, with a prolonged period of wage stagnation lasting for over fifteen years. The Foundation notes that inflation surpassed nominal wage growth between 2008 and 2014. Subsequently, even when real wage growth resumed, it was sluggish, disrupted by events like the Brexit vote and the COVID-19 pandemic.
Looking ahead, the ONS reports that wage growth, excluding inflation, slowed to 4.6% in the three-month period ending in October. This deceleration in pay increases may prompt the Bank of England to consider lowering interest rates during their upcoming decision-making session.
Additionally, recent figures indicate a significant drop of 38,000 employees from payrolls in November, the largest decline in five years, signaling a weakened job market. Younger workers are particularly struggling, with an 85,000 increase in unemployed individuals aged 18 to 24, the sharpest rise since November 2022.
Liz McKeown, the ONS director of economic statistics, highlights the ongoing weakening of the labor market, with reduced hiring activities and fewer job opportunities reported by firms. The challenging job climate is reflected in the rise in unemployment rates, especially among younger age groups.
TUC General Secretary Paul Nowak emphasizes the importance of boosting demand to revive the economy and job market. He calls for the Bank of England to consider further interest rate cuts to stimulate investments and consumer spending, especially given the current economic slowdown’s lingering effects on employment.
It is crucial to provide necessary support to those out of work during these challenging times, ensuring they receive the assistance needed to navigate the uncertain job market landscape.