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Unexpected rise in pay growth while vacancies fall

The number of vacancies in the UK continued to fall for the 19th consecutive period

Annual pay growth rose by 1.4% in the last year, according to new data from the Office for National Statistics (ONS).

This included an annual growth in total earnings, including bonuses by 5.8% from October to December 2023; annual growth in employees’ average regular earnings, excluding bonuses, was 6.2%. 

The number of vacancies in the UK continued to fall for the 19th consecutive period, by 26,000 in the last quarter to 932,000.  

Meanwhile the employment rate increased by 0.2% in the last quarter, and unemployment decreased by 0.2%, returning to the rate it was a year ago. 

The economic inactivity rate for people aged 16 to 64 was mostly unchanged from last quarter, but is above estimates from a year ago due to long-term sickness remaining at historically high levels.  

Read more: Pay growth picks up speed as candidate numbers surge

Labour disputes, mostly in the health and social work industry, led to 108,000 working days being lost in December 2023. 

Paul Devoy, CEO of Investors in People, told HR magazine that while vacancies continued to decline, the long-term picture for growth remained the same. 

He said: “We have low productivity, an ageing workforce and record numbers of people on out-of-work benefits.  

“The old remedies of having access to flexible labour from other countries is not there in the way it was in the past for employers.   

“The answer is that employers need to focus on investing in their own workforce, to support them to be more productive, and alongside that invest in new technologies.   

“Until this becomes the norm, I don’t see any fundamental change on the horizon for the performance of the labour market.” 

In separate research, the CIPD revealed yesterday that basic pay increase expectations in the private sector over the next 12 months fell for the first time since 2020, from 5% to 4%.  

It also revealed that 21% of employers reported trouble filling vacancies, with the same proportion expecting significant problems filling roles over the next six months. 

Read more: Number of UK workers worried about job loss doubles

Neil Carberry, chief executive of the Recruitment and Employment Confederation (REC), said that while pay did not decrease as much as expected, a longer-term plan is needed to boost growth.  

He said: “The significant rise in the national minimum wage will underpin wage growth to some extent this spring, and many companies report that this second significant rise in two years is proving challenging.” 

Carberry continued: “A long-term plan to tackle skills and labour shortages, economic inactivity and weak productivity is long overdue. 

“The resilience we have seen in the jobs market cannot be sustainable in the long-term unless we see a more significant return to economic growth.”