Rise in unemployment as real-term wage growth continues to fall
The rate of employment grew in the first three months of the year, according to the Office for National Statistics (ONS). But so did the figures for unemployment.
It found that the unemployment rate rose by 0.1 percentage points to 3.9 per cent, which the ONS said was largely down to people unemployed for over 12 months.
The ONS data found that the estimated number of vacancies between February and April dropped by 55,000 to a total of 1,083,000. It’s the tenth straight period in which vacancies have dropped, with the ONS noting that respondents pointed to economic pressures as a reason for holding back on recruitment.
The ONS also noted that the estimate of payrolled employees for April 2023 shows a monthly decrease, down to 29.8 million. That’s a fall of 136,000 since March and represents the first fall since February 2021, though the ONS cautioned the figure is only provisional and so likely to be revised.
While the unemployment rate increased, so too did the employment rate. It moved up by 0.2 percentage points to 75.9 per cent between January and March. The ONS said this was driven by an increase in part-time and self-employed workers.
Inflation wiping out wage growth
The data also highlighted the impact that inflation is continuing to have on the real terms changes to our pay.
According to the ONS, growth in total pay (which includes bonuses) was 5.8 per cent between January and March 2023, while regular pay (which excludes bonuses) was up by 6.7 per cent.
However, when adjusted for inflation, total pay actually dropped by three per cent, while regular pay fell by two per cent.
A resilient jobs market
Myron Jobson, senior personal finance analyst at interactive investor, said that a “triple whammy” of credit tightening, rising interest rates and high inflation had contributed to push unemployment higher.
He continued: “The job market has remained remarkably robust and resilient amid ongoing economic uncertainty, but the latest labour market figures suggest that the post pandemic hiring sugar rush is abating. Job openings have fallen in 14 out of 18 industry sectors, suggesting that many employers are reining in their recruitment over concerns of the UK’s economic picture. With borrowing costs on the up and inflation remaining rampant, the job market faces no shortage of headwind.”