The UK’s employment rate in the three months to May came in at 74.4%, which is below estimates of a year ago and the previous quarter (falling by 81,000), according to the Office for National Statistics (ONS).
And the UK is the only G7 country whose employment rate is not back to the pre-pandemic level, the Department for Work and Pensions (DWP) said. In total, 32.9 million people are in employment.
However, the unemployment rate for March to May 2024 was estimated at 4.4%, which is above figures recorded last year and in the last quarter.
It means an estimated one-and-a-half million people are unemployed, while a near record 2.8 million are out of work due to long-term sickness.
But the “truly dire” state of the labour market was evident in the number of people classed as economically inactive, which has spiralled to 9.4 million (22.1%), DWP said.
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Liz Kendall MP, work and pensions secretary, said: “Behind these statistics are real people, who have for too long been ignored and denied the support they need to get into work and get on at work.
“Our Plan to Get Britain Working again will overhaul job centres, deliver a youth guarantee, and give local areas the power they need to tackle economic inactivity and break down barriers to a brighter future.”
Turning to wages, the ONS revealed that annual wage growth in employees’ average regular earnings (which excludes bonuses) was 5.7%. Growth was last lower than this in June to August 2022, when it was 5.4%.
Meanwhile, annual growth in total earnings (including bonuses) was also at 5.7%, which was last lower in November 2023 to January 2024, when it was 5.6%.
Once wage growth had been adjusted for inflation, regular pay came in at 2.5% and total pay was 2.2%.
Overall, average weekly earnings were estimated at £689 for total earnings and £643 for regular earnings in May 2024.
August or September base rate cut?
Ashley Webb, UK economist at Capital Economics, said: “While the easing in wage growth in May was broadly in line with what the consensus and the Bank of England expected, it probably doesn’t offset the overshoot in services inflation in recent months. As a result, we have changed our forecast for the timing of the first interest rate cut from 5.25% from August to September, although it is a close call.”
Webb added that the loosening in the labour market “appears to be reducing the upward pressure on wages” as it forecasts wage growth to slow to 3% by the end of next year.
“That’s why we still expect rates to fall to 3% by the end of 2025 instead of 4% as investors expect,” Webb added.
Nicholas Hyett, investment manager at Wealth Club, said: “Wage growth may be starting to slow in the UK, although all sectors still reported above-inflation pay rises – from a low of 3% in construction to 6.7% in finance and business services. That’s great news for workers, but less good for the Bank of England, since it underpins stubbornly high inflation rates in the service sector.
“Impressive wage growth comes despite a modest rise in unemployment and fall in vacancies – which are usually signs the employment market is weakening a touch. That could mean wage growth starts to fade from here, as we annualise pay rises made in the second half of last year. If so, it would be among the last pandemic hangovers to fade, and could mean we see interest rates start to fall quite quickly.”
