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Record-high bonus month but unemployment rises

Record-high bonus month but unemployment rises
Paloma Kubiak
Written By:
Paloma Kubiak

Bonus awards in March were the highest on record, but unemployment jumped again from 1.44 million to 1.48 million, official statistics reveal.

Annual growth in regular earnings, which exclude bonuses, was estimated at 6% – the same as the figure recorded in the three months to February. This means growth has slowed for the sixth time and has now paused.

Meanwhile, annual growth in employees’ average total earnings – including bonuses – was 5.7%. This is the highest on record.

With March being “peak bonus month”, according to the Office for National Statistics (ONS), this latest figure is slightly up on the 5.6% released last month.

Overall, this is now the tenth month in a row that wages have risen faster than inflation. However, once wages were adjusted for inflation, regular pay was 2% and total pay was 1.7%.

The ONS noted that average weekly earnings were estimated at £682 for total earnings and £637 for regular earnings in March 2024.

Split between the public and private sector, the former “remains strong” at 6.3% annual average regular earnings growth, while the latter is estimated at 5.9%.

By sector, manufacturing and the finance and business services sectors saw the largest annual regular pay growth, at 6.8%.

Unemployment up, employment down

Turning to unemployment (for those aged 16-plus), the ONS revealed the rate was estimated at 4.3% in the quarter to March 2024.

This is above estimates of a year ago, and increased in the latest quarter, taking it to the highest level since last July. In the three months to February, there were an estimated 1.44 million unemployed; this time round, the figure stands at 1.48 million.

At the same time, the number of payrolled employees in the UK fell by 5,000 between February and March, but rose by 288,000 in the year to March 2024.

Early estimates for April suggest payrolled employees decreased by 85,000 on the month, but increased by 129,000 on the year to 30.2 million. The employment rate was given as 74.5%. Again, this is below estimates of a year ago, and decreased in the latest quarter.

Elsewhere, the UK economic inactivity rate for people aged 16-64 years was estimated at 22.1% in January to March 2024, above estimates of a year ago, and increased in the latest quarter. This means an estimated 9.3 million are classed as economically inactive.

However, between February and April 2024, the estimated number of vacancies in the UK decreased by 26,000 on the quarter to 898,000. Vacancies decreased on the quarter for the 22nd consecutive period, but are still above pre-coronavirus (Covid-19) pandemic levels.

There were an estimated 22,000 working days lost because of labour disputes across the UK in March 2024, the ONS revealed.

‘Risk of inflation persistence’ and rate cut speculation

Michael Brown, senior research strategist at Pepperstone, said: “Clearly, such a pace of earnings growth is not consistent with a return to the BoE’s 2% inflation target, while upside earnings risks do remain, particularly with April’s minimum wage hike and likely comparable earnings increases among other lower-wage earners, yet to feed into the data.

“At the margin, today’s wage data somewhat raises the risk of inflation persistence within the UK economy, which is a factor that the MPC’s hawks are likely to point to as a reason to delay the first bank rate cut to the end of summer.”

Susannah Streeter, head of money and markets at Hargreaves Lansdown, said: “Pay growth remains steamy, with bonuses in March the highest on record. This may keep policymakers at the Bank of England a bit hot under the collar. They’ll be worried about the persistence of inflationary pressures.

“However, with unemployment rising, there are signs the labour market should keep cooling, keeping hopes for a summer interest rate cut alive. The concern is that hefty wage bills may be passed on in the form of higher prices for goods and services.

“Inactivity rates have also shifted higher, with the numbers of long-term sick limiting the pools of available labour. This does make the Bank of England decision to cut rates more tricky, and they’ll want to see more data indicating an easing of pressures, which is why an August rate cut is looking more likely.”