Real-term wages take a historic hit as job vacancies fall again
According to its latest jobs market data, the ONS found that growth in total pay (including bonuses) between November 2022 and January 2023 reached 5.7%. However, the ONS pointed out that when inflation is taken into account, in real terms total pay dropped by 3.2% over the period.
The organisation also found that vacancies between December 2022 and February 2023 dropped by 51,000, to a total of 1.124 million. That’s the eighth straight period in which vacancies fell over the quarter, which the ONS said was a reflection of economic pressures holding back recruitment.
That’s the largest drop seen since April 2009, and is one of the biggest falls since records began.
The unemployment rate for the period was found to be 3.7%, largely unchanged on the previous period, while employment crept up slightly to 75.7%.
The skills mismatch
Myron Jobson, senior personal finance analyst at Interactive Investor, said that the issues in the labour market “remain clear to see”, including the significant increase since the pandemic in those neither working nor looking for a job.
He continued: “Although the number of vacancies has fallen since last summer, it is still well above pre-pandemic levels, and there remains a major mismatch between skills required for available jobs and those of available workers.
“Overall wage growth still cannot keep pace with inflation which continues to run hot despite cooling in recent months. The resulting squeeze on real incomes is a key factor behind the sluggish state of the economy.”
Showing the strain
The “ultra-tight employment market” may be starting to ease, according to Alice Haine, personal finance analyst at BestInvest, who pointed to the combination of rising interest rates, “sticky inflation” and employers under pressure to increase wages when their budgets are more strained.
Haine continued: “While the UK avoided a recession at the end of last year and the economy actually grew in January, the road ahead remains uncertain. The strain is already evident with British companies easing back on recruitment and hiring intentions on the retreat as the high inflation and interest rate environment slows output. Job security will become a key theme as the year goes on.”