UK labour market cools as pay growth slows and job losses rise
The UK’s jobs market has continued to cool, according to official figures, amid a slowdown in annual pay growth and rising redundancies.Figures from the Office for National Statistics (ONS) show annual growth in regular earnings, excluding bonuses, slowed to 4.8% in the three months to July, down from 5% in the three months to June, matching the forecasts of City economists.The official unemployment rate was unchanged on the previous month in July, at 4.7%, the highest level in four years, also matching predictions.
This edged up from 4.6% in the previous three months and above estimates of a year ago amid a broad-based slowdown in hiring, falling job vacancies, and rising unemployment-related benefit claims.“The labour market continues to cool, with the number of people on payroll falling again, while firms also told us there were fewer jobs in the latest period,” said the ONS director of economic statistics, Liz McKeown.“Wage growth excluding bonuses edged down further in cash terms, though it remains strong by historic standards.”The latest figures are expected to confirm a boost worth hundreds of pounds for millions of pensioners.
Average earnings including bonuses in the three months to July, which are used to calculate the pensions triple lock, grew by 4.7%.Helen Morrissey, the head of retirement analysis at Hargreaves Lansdown, said such an increase would see a full new state pension rise from its current level of £230.25 a week to £241.05 per week from April.
Those retiring on the basic state pension would receive a rise in weekly income from £176.45 a week to £184.75.The government is yet to confirm the increase.Labour has committed to retaining the triple lock on the state pension, which guarantees annual increases in line with whichever is the higher of inflation, 2.
5% or annual earnings.The chancellor, Rachel Reeves, is under pressure to revive Britain’s economy before her 26 November budget, amid fierce criticism of Labour’s economic management and concerns over the strength of the public finances.Business groups have complained since Reeves’s first autumn budget that her £25bn increase in employer national insurance contributions and 6.7% rise in the “national living wage” would force them to cut jobs and raise prices for consumers.The ONS’s figures are based on its widely criticised labour force survey, which has suffered from collapsing response rates.
Experts have argued this leaves policymakers “flying blind”, creating the prospect that decisions are being taken based on flawed data,However, economists said there was clear evidence of the jobs market cooling,Separate figures from HMRC showed a decline in the number of workers on company payrolls of 8,000, matching City forecasts,The early estimate for the number of payrolled employees, which can be prone to revision, was down by 127,000 compared with a year earlier,Suren Thiru, the economic director at the Institute of Chartered Accountants in England and Wales, said: “These figures suggest that the UK’s jobs market is wilting under the weight of a stagnating economy and skyrocketing staffing costs as more businesses aim to shrink their workforce in response to these twin headwinds.
Sign up to Business TodayGet set for the working day – we'll point you to all the business news and analysis you need every morningafter newsletter promotion“While the pace at which pay growth is slowing remains painfully pedestrian, its current downward trajectory should gather momentum over the autumn as the eye-watering financial squeeze on businesses takes its toll on pay awards.”After taking account of inflation, annual growth in regular pay was 1.2% in the three months to July, down from 1.5%.Reeves is widely expected to raise taxes in her autumn budget.
However, business leaders have warned a weaker growth outlook will make it harder for her to raise taxes without further harming the economy.Daisy Cooper, the Liberal Democrat Treasury spokesperson, said Labour had committed an act of “self sabotage” by pushing more people out of work.“[It has put] even more pressure on already stretched public services and leaving businesses scrambling just to keep the lights on.”Strong wage growth has caused a headache for the Bank of England by stoking inflationary pressures, putting further interest rate cuts at risk after four reductions in the past year.However, a deeper slowdown in the jobs market could show the economy is deteriorating, supporting faster rate cuts.
The Bank is widely expected to keep its base rate unchanged at 4% at its next policy meeting on Thursday,City investors predict stubbornly high inflation could lead the central bank to keep rates on hold until spring next year, with a quarter-point reduction not fully priced in by markets until April 2026,Official figures due on Wednesday are expected to show the UK’s headline inflation rate held steady at 3,8% in August, almost twice the Bank’s 2% target rate,
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