Nerves are mounting about the jobs market today with figures showing wage growth slowing and unemployment nudging up.
Pay rises have fallen to their lowest level in more than two years, despite a string of bumper public sector deals.
Meanwhile the jobless rate jumped by more than expected in the three months to September.
Although wages are still outstripping inflation, analysts warned of ‘increasing wariness’ among employers.
Businesses are facing a massive costs hit after Rachel Reeves hiked employer national insurance in the Budget – which was unveiled after the period covered by the statistics.
Chancellor Rachel Reeves and Prime Minister Sir Keir Starmer are pictured here talking to staff at University Hospital Coventry and Warwickshire on October 31
The jobless rate jumped by more than expected in the three months to September
Pay rises have fallen to their lowest level in more than two years, despite a string of bumper public sector deals
The Office for National Statistics said average regular earnings growth eased back to 4.8 per cent in the three months to September, down from 4.9 per cent in the previous three months.
This marked the lowest level since the three months to June 2022.
The new figures follow widespread criticism for chancellor Rachel Reeves‘ Budget last month and come as a new setback for Prime Minister Sir Keir Starmer.
Earnings growth continues to outstrip inflation, however, as pay increased by 2.7 per cent in the three months to September with Consumer Prices Index inflation taken into account.
The ONS said the rate of UK unemployment rose to 4.3 per cent in the three months to September, up from four per cent in the previous three months – and far higher than the 4.1 per cent pencilled in by most economists.
This was the highest level since the three months to May, although the ONS said the estimate should be treated with caution given ongoing low response rates to its jobs survey.
Workers on payrolls also fell, down by 5,000 between September and October to 30.4million, the figures showed.
Liz McKeown, ONS director of economic statistics, said: ‘Growth in pay excluding bonuses eased again this month to its lowest rate in over two years.
‘The number of people on payrolls fell slightly in September and while it remains up on the year, annual growth continues to slow.
‘The labour force survey estimates show a different picture, however, we continue to advise caution when interpreting short-term changes in these estimates, as the improvements to data collection introduced at the beginning of the year are still feeding through.
‘Job vacancies have fallen again, as they have been doing for more than two years now.’
ONS data also showed a large fall in the inactivity rate for those aged between 16 and 64 not actively looking for work – down to 21.8 per cent in the three months to September from 22.2 per cent in the previous quarter.
Work and Pensions Secretary Liz Kendall said: ‘While it’s encouraging to see real pay growth this month, more needs to be done to improve living standards too.
‘So, from April next year, over 3million of the lowest paid workers will benefit from our increase to the national living wage.’
Ms Kendall said that having 2.8million people ‘locked out of work due to poor health’ was ‘bad for people, bad for businesses and it’s holding our economy back’.
Work and Pensions Secretary Liz Kendall (pictured) has described the number of people ‘locked out of work due to poor health’ as ‘bad for businesses’
She added: ‘That’s why our Get Britain Working plan will bring forward the biggest reforms to employment support in a generation, backed by an additional £240million of investment.’
The slowdown in wages growth has helped pave the way for interest rate cuts from the Bank of England, which last week delivered a reduction to 4.75 per cent from five per cent – the second decrease this year.
But it comes amid mounting warnings from business giants over the impact of the Chancellor’s Budget move to increase employers’ national insurance contributions on jobs and prices for consumers.
The likes of Asda, Sainsbury’s and Marks & Spencer have all revealed they will face a major cost hike as a result of the measure and signalled this could also result in some pressure on prices for shoppers.
Experts have warned the tax hike is set to push up inflation.
Gora Suri, economist at PwC UK, predicted there would also likely be pressure on wages.
He said: ‘If businesses pass some of this onto workers, this could weigh on pay growth in the short to medium term.’