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Vacancies fall while real pay growth strengthens

Recent labour market trends are continuing, according to ONS director of economic statistics

Vacancies have continued to fall but lower inflation has spurred pay growth, according to the latest estimates from the Office for National Statistics (ONS).

Annual growth in total earnings was 5.6% in November 2023 to January 2024, and annual growth in employees' average regular earnings (excluding bonuses) was 6.1%.

Adjusted for inflation, total pay rose by 1.4%, while regular pay rose by 1.8%.

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

The latest figures continue recent upward trends, according to Liz McKeown, ONS director of economic statistics.

She said: “Recent trends in the jobs market are continuing with earnings, in cash terms, growing more slowly than recently but, thanks to lower inflation, real terms pay continues to increase.”

Jack Kennedy, senior economist at global hiring platform, Indeed, added that data from Indeed’s Wage Tracker found high demand in some sectors continues to push pay growth, as does the planned minimum wage hike in April 2024 from £10.42 to £11.44.

He told HR magazine: “Posted wage growth remains particularly strong in lower-paid occupations like childcare, cleaning, retail and hospitality, running in the 7%-9% range. Though the labour market has cooled, hiring challenges persist in these areas and continue to support pay increases.

“The latest round of supermarket wage hikes is the most recent example of this, in advance of a 9.8% rise in the national living wage coming into effect in April.” 

According to the ONS data, employment rates were at 75% in November 2023 to January 2024, down since last quarter but up since the same period the year before.

The unemployment rate was estimated at 3.9% in November 2023 to January 2024, above estimates of a year ago (November 2022 to January 2023) but largely unchanged on the previous quarter.

Read more: Labour shortage persists as employers turn to AI

The UK economic inactivity rate for those aged 16 to 64 years was 21.8%, above estimates of a year ago and increased in the latest quarter.

Meanwhile, in December 2023 to February 2024, the number of vacancies in the UK fell by 43,000 to 908,000. Quarterly vacancies fell for the 20th consecutive period but are still above pre-pandemic levels.

Ben Keighley, founder of AI recruitment platform Socially Recruited commented: “Vacancies may have fallen but that’s indicative of the tightening economy, as the number of people searching for work has hardly budged. 

“With a high, and rising, number of people classified as economically inactive and demand for workers going unmet in some sectors, it continues to be a jobseeker market in many parts of the UK.”

The number of payrolled employees in the UK slightly increased by 15,000 between December 2023 and January 2024, and rose by 386,000 (1.3%) between January 2023 and January 2024. Meaning, while the number of payrolled employees continues to increase, the rate of annual growth is slowing.

However, businesses are optimistic for growth later in the year, according to Recruitment and Employment Confederation (REC) chief executive Neil Carberry.

He said: “Today’s numbers are marginally weaker than expectations as the jobs market waits on growth to return. Recruiters report that firms are still ready to move but are taking longer to make decisions about investment and hiring in the face of economic uncertainty.

“This explains the relatively slow rate of decline, a picture which contrasts with business surveys that show high levels of optimism for later in the year. The Bank of England beginning to cut the base rate would deliver a shot of confidence to businesses and support a likely bounce back in growth this summer.”