Earnings growth has reached its peak, while living standards continue to rise despite a slowdown in demand for workers. The upcoming state pension uprating for next year poses a significant decision for ministers.
These are the key findings from the Office for National Statistics’ abbreviated report on the UK job market. The release of the labor force survey – the preferred gauge of employment and unemployment trends – has been postponed by a week due to difficulties in obtaining responses from individuals regarding their employment status.
Nonetheless, data on earnings, vacancies, and flash estimates of employment and pay from HMRC have been published, and they convey a consistent message.
Despite a decline in job opportunities, earnings have increased. Over the past three months until August, total earnings, including regular pay and bonuses, were 8.1% higher compared to the same period in 2022. The increase was 8.5% in the previous three months until July. Excluding bonuses, the growth in regular pay went from 7.9% in the year until July to 7.8% in the year until August.
The decrease in available jobs has contributed to a decrease in upward pressure on pay. Job vacancies dropped by 43,000 to 988,000 in the three months until September, with a decrease of 256,000 over the year.
However, it’s important to consider that there are still 187,000 more job vacancies compared to pre-pandemic levels. This suggests that while earnings growth may have peaked, it will gradually decline unless a full-blown recession occurs.
If the recent trend of declining inflation continues, real earnings – the purchasing power of pay adjusted for prices – should remain positive. However, this is not guaranteed, as increased oil prices resulting from the conflict between Israel and Hamas could lead to higher inflation in the coming months.
Lastly, the government faces the decision of how to handle the triple lock, which determines that state pensions should increase each year based on the highest of earnings, inflation, or 2.5%.
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