According to the latest official statistics, UK wages continue to rise while job vacancies continue their decline.
Office for National Statistics data shows that the average annual earnings rose to 5.9% during the three months ending December 2024. This is the fastest increase since April 2024. The annual earnings growth, including bonuses, climbed from 5,5% to 6%.
The figures showed that between October and December of last year, wages outpaced the inflation rate as measured by the Consumer Prices Index by 3.4 percentage point.
In the private sector, earnings growth was 6.2% while it was only 4.7% in the public sector.
In the three-month period ending in January, the ONS reported that the number of job openings fell for the 31st time consecutively. It dropped by 9,000 and reached 819,000. These numbers are still higher than pre-pandemic levels.
The revised estimate for the month of December 2024 revealed that the number on the payroll had decreased by 14,000 since the previous month. The number showed an increase of 44,400 (0.1%) on a year-over-year basis.
The provisional estimate of January 2025 is up by 21,000.
Liz McKeown, ONS’s director of economic statistics, said that the growth in pay (excluding bonuses) rose for a third time in a row, and was seen both in the public and private sectors. Real pay growth increased after inflation was taken into account.
The number of employees in payroll remained largely unchanged over the last three-month period of the year. This continues a trend of slower growth on a medium term basis. The number of vacancies continued to decline in the last quarter, although more slowly. Total number remained a little higher than its pre-pandemic levels.
She cautioned against interpreting these figures too quickly, because, although the number interviewed this quarter is higher, the recent improvements in data collection still affect the headline estimates.
Jack Kennedy, senior economics at Indeed, stated: “Stagflation worries continue to haunt the UK economy, as wage growth is limiting the amount of monetary medication the Bank of England can likely administer. The economy could use a boost as job cuts and hiring restrictions are announced ahead of the April minimum wage increase and National Insurance increase. “Despite the fact that December’s pay growth was 6%, rate-setters continue to indicate only gradual rate cuts despite the economy being on the brink of recession.
He noted that the Indeed wage tracker indicated strong pay pressures continued in January, with posted wages growing by 6.1% on an annual basis.
Kennedy said: “Pay-pressures are around twice the levels that would be consistent with maintaining inflation at Bank’s target of 2%, giving policymakers a constant headache.”
The “Real-time Job Postings Data” shows that hiring is still soft, but not getting weaker. Since the October Budget, UK job postings are 15% below their pre-pandemic level as of mid-February. “Employers continue to be hesitant to hire in this uncertain economy, and few have the confidence to increase hiring.”
Kate Shoesmith said, “Many companies are still treading water.” The hiring is happening, but it’s slower than we would like. The rise in pay-roll employees and a small increase in employment rates, both for the quarter and year, demonstrate the resilience of UK businesses and labour market.
“But employers must be supported if the economy is to grow and improve. This calls for investing, not cost-cutting. We need the government to work closely with businesses on strategies that increase productivity.
The Bank of England should not be concerned about the rise in pay, as it is expected in an economic environment that continues to struggle with skills shortages. It also shouldn’t have a negative impact on interest rates. Avoid jumping to conclusions about pay right now, because many pay increases are typically announced in April, at the beginning of a new fiscal year. We haven’t seen the full impact of national insurance hikes, which will also be implemented at that time.
Tomorrow, 19 February, the ONS will release its latest inflation statistics.
