UK wage growth has risen for the first time in more than a year, climbing to 5.2 per cent in the same period, even as mounting evidence points to a cooling jobs market amid recent Budget measures.
While the rate of UK unemployment remained unchanged at 4.3 per cent in the three months to October.
The wage growth increase from 4.9 per cent marks the first uptick in regular earnings growth since August last year, according to the Office for National Statistics. However, fresh data shows companies are now slashing jobs at the fastest pace since the Covid-19 lockdowns in January 2021.
With the exception of the pandemic period, UK employment has decreased at the greatest rate since the 2008/09 global financial crisis.
Official figures show regular earnings growth outstripped inflation by three per cent in the three months to October, with Consumer Prices Index (CPI) inflation taken into account.
The ONS estimated the number of people on UK payrolls fell by 35,000 to 30.4 million between October and November.
The rate of UK unemployment remained unchanged at 4.3 per cent in the three months to October
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Job vacancies continued their decline, falling by 31,000 to 818,000 in the three months to November.
Liz McKeown, ONS director of economic statistics said: “After slowing steadily for over a year, growth in pay excluding bonuses increased slightly in the latest period, driven by stronger growth in private sector pay.”
The closely watched S&P Global Flash Composite Purchasing Managers’ Index reveals companies have been rapidly reducing their workforce this month.
Service providers have experienced a particularly steep drop in recruitment, largely due to not replacing staff who voluntarily left.
Some firms have either cut working hours or implemented longer-term workforce restructuring plans.
James Reed, boss of one of the UK’s largest recruitment firms said that vacancies advertised on Reed’s website had fallen 13 per cent between October and November.
The vacancy figure is now 26 per cent lower than a year ago, which Reed described as a “significant decline”.
The job market decline comes in the wake of significant Budget measures announced by Chancellor Rachel Reeves on 30 October.
Employers will face a rise in National Insurance contributions from 13.8 per cent to 15 per cent on staff salaries above £5,000 from April, down from the current £9,100 threshold.
The National Living Wage will also increase by 6.7 per cent to £12.21 per hour. The hourly minimum wage for 18 to 20-year-olds will see an even steeper rise of 16.3% to £10.
S&P Global blamed the employment decline on the ‘gloomier outlook’ following these tax hikes and the ‘broader direction of government policy’.
Chris Williamson, chief business economist at S&P Global Market Intelligence, warned: “Businesses are reporting a triple whammy of gloomy news as 2024 comes to a close, with economic growth stalled, employment slumping and inflation back on the rise.”
He noted that economic growth momentum has been lost since the earlier expansion this year, as businesses and households have responded negatively to government policies.
Williamson also highlighted that many companies are responding with a ‘market pull-back’ in hiring, particularly within the leisure and financial services sectors.
Proposed new regulations were cited as another factor behind businesses’ reluctance to employ more staff.
Manufacturing output shrank in December for the second consecutive month, reaching its lowest point in 11 months at 45.7 compared to 48.3 in November.
Goods makers were impacted by customer destocking and lower demand from Europe, leading to the fastest decrease in export sales in 14 months.