A recent analysis has shown that the average worker’s weekly income has only increased by £3.80 compared to a year ago. This minimal rise in earnings has been largely offset by a surge in living expenses, according to findings by the Resolution Foundation.
In parallel, the Office for National Statistics disclosed that the UK’s unemployment rate has climbed to 5.1% in the three months leading up to October, up from 5% in the previous month, marking the highest non-pandemic level since 2016.
Reportedly, businesses held off on hiring new employees prior to the recent Budget announcement, and a rise in national insurance contributions further dampened the demand for workers. Nevertheless, the reduction in job vacancies seems to have stabilized, raising hopes of increased recruitment activity by companies. Despite a slowdown in wage growth, average salaries are still somewhat outpacing inflation.
Real wage growth, accounting for inflation, saw a mere 0.5% increase in the October quarter, as per the ONS. Over the past year, actual weekly earnings have risen by just £3.80 in real terms, which the Resolution Foundation likened to covering the cost of a cup of coffee.
The repercussions of the 2008 financial crisis are still felt by many workers, with a prolonged period of wage stagnation lasting fifteen years. The Foundation highlighted that inflation exceeded nominal wage growth from 2008 to 2014, and even after real wage growth resumed, it remained sluggish, impacted by the Brexit vote and the subsequent disruptions caused by the COVID-19 pandemic.
Before adjusting for inflation, wage growth decreased to 4.6% in the October quarter, as reported by the ONS. This deceleration in pay hikes is expected to bolster the case for the Bank of England to consider lowering interest rates in its upcoming decision.
The latest data revealed a significant drop of 38,000 employees on payrolls in November, the largest decline in five years, indicating a weakened job market. Younger individuals faced challenges in securing employment opportunities, with an 85,000 rise in unemployment among those aged 18 to 24, marking the sharpest increase since November 2022.
Liz McKeown, the ONS director of economic statistics, emphasized the ongoing deterioration in the labor market, attributing the drop in payroll numbers and the rise in unemployment to subdued hiring activities.
TUC General Secretary Paul Nowak underscored the importance of stimulating demand to revive the economy, calling for a further interest rate cut by the Bank of England to facilitate investment by businesses and spending by households. He also emphasized the necessity of providing adequate support to individuals struggling with unemployment in the current economic scenario.