{"id":17358,"date":"2022-03-17T01:01:00","date_gmt":"2022-03-17T01:01:00","guid":{"rendered":"https:\/\/www.economicsobservatory.com\/?post_type=question&p=17358"},"modified":"2022-03-17T08:59:40","modified_gmt":"2022-03-17T08:59:40","slug":"what-do-the-latest-uk-labour-market-data-reveal","status":"publish","type":"question","link":"https:\/\/www.economicsobservatory.com\/test\/what-do-the-latest-uk-labour-market-data-reveal","title":{"rendered":"What do the latest UK labour market data reveal?"},"content":{"rendered":"\n

According to the latest data<\/a>, wages are not growing fast enough to keep up with surging inflation. Regular pay \u2013 once adjusted for price growth \u2013 has fallen by 1% (Office for National Statistics, ONS, 2022). The data also show that while the employment rate has increased from the previous quarter, so too has economic inactivity.<\/p>\n\n\n\n

The latest figures (which cover the period from November 2021 to January 2022) show that the labour market is continuing to recover post-pandemic, at least in the headline rates. The unemployment rate has dropped (by -0.2 percentage points), and the employment rate has increased slightly (by 0.1 percentage points) over the quarter. This paints a promising picture.<\/p>\n\n\n\n

The number of job vacancies is at also at a record high \u2013 with 1,318,000 positions currently advertised. Yet the growth rate of vacancies continues to slow, suggesting that firms might be altering their recruitment strategies.<\/p>\n\n\n\n

What is happening with prices and wages?<\/h3>\n\n\n\n

UK inflation is currently at 5.4%, the highest it has been in 30 years. Many people are concerned as to whether wages will grow fast enough to offset the rising cost of living. According to the latest data, they have not. Real regular pay, which is pay excluding bonuses and then adjusted for inflation, has fallen 1% over the year.<\/p>\n\n\n\n

In nominal terms, average total pay has grown by 3.8% from November 2021 to January 2022, and by 4.8% including bonuses. In fact, it is these strong bonus payments over the last six months that have kept the growth rate positive (at 0.1% for the year).<\/p>\n\n\n\n

But not every industry offers bonuses, and they are more commonly found in the highest paying jobs - with the finance and business sector seeing the largest growth in total wages. Bonuses are also much more prevalent in the private sector compared with the public sector, leading to a significant gap in pay growth between the two.<\/p>\n\n\n\n

It is likely that there is a significant base effect present in these data. As the figures measure the yearly growth, the starting point (or \u2018base\u2019) is the winter of 2020\/21. At this point, there were strict lockdown measures across the UK, with many people furloughed or working reduced hours. A relatively low base in terms of wages means that the year-on-year growth figures may exaggerate the extent to which pay is improving.<\/p>\n\n\n\n

Figure 1: Average weekly earnings growth \u2013 total and regular pay (2001 to 2022)<\/strong><\/h4>\n\n\n
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