UK wage growth has slowed to its lowest level for more than a year as vacancies also fell back once again as Britain’s jobs market cools further, according to official figures.
The Office for National Statistics (ONS) said average regular pay, excluding bonuses, fell to 6.2 percent in the quarter to December, down from an upwardly revised 6.7 percent in the three months to November.
This marks the slowest growth seen since the three months to October 2022.
But when taking Consumer Prices Index (CPI) inflation into account, real regular wages rose by 1.9 percent – a high since the summer of 2019, excluding the pandemic-skewed years.
Vacancies also fell for the 19th straight month, down 26,000 to 932,000 in the three months to January.
Ben Keighley, founder of AI recruitment platform Socially Recruited commented: “The labour market is still posing a headache for the Bank of England, and the low unemployment rate and earnings growth could have the knock-on effect of keeping interest rates higher for longer.
“Wage growth might be cooling, but it will take a much more dramatic slowdown in pay for the Bank to be content that it can meet its two percent inflation target.”
But in a sign that the jobs market as a whole remains largely resilient, the unemployment rate fell to 3.8 percent in the final three months of 2023, down from 3.9 percent in the three months to November, marking the lowest level since November to January 2023.
Liz McKeown, director of economic statistics at the ONS, said: “It is clear that growth in employment has slowed over the past year.
“Over the same period the proportion of people neither working nor looking for work has risen, with historically high numbers of people saying they are long-term sick.
“Job vacancies fell again, for the 19th consecutive month. However, there are signs this trend may now be slowing.
“In cash terms, earnings are growing more slowly than in recent months, but in real terms they remain positive, thanks to falling inflation.”
Chancellor Jeremy Hunt said: “It’s good news that real wages are on the up for the sixth month in a row and unemployment remains low, but the job isn’t done.
“Our tax cuts are part of a plan to get people back to work so we can grow the economy – but we must stick with it.”
Jack Kennedy, senior economist at the global hiring and matching platform, Indeed, commented: “The UK labour market remained tight at the end of last year despite a faltering economy. The ONS’ reinstated Labour Force Survey estimates show lower unemployment and higher inactivity than previously thought, underlining the Bank of England’s concerns about labour supply constraints supporting high wage growth for some time yet.
“While the latest figures show a further easing of pay pressures as the labour market softens, it remains well above the Bank of England’s comfort zone.”
Indeed’s Wage Tracker shows that advertised pay for new hires rose by 6.4 percent year-on-year in January. Mr Kennedy said: “Though down from 6.6 percent in December, UK wage growth remains well above that in the US and euro area. That underlines the challenge facing Threadneedle Street and why we may be waiting longer for UK interest rate cuts than from the Fed and ECB.
“Annual wage growth remains particularly strong in lower-paid categories such as childcare (9.9 percent), cleaning (8.4 percent) and retail (8.1 percent).
“With many of these sectors still grappling with worker shortages and a near double-digit percentage increase in the National Living Wage due in April, elevated pay pressures in this segment of the labour market don’t seem likely to abate soon.”