The Office for National Statistics (ONS) has released its latest labour market figures, revealing a mixed picture for the UK economy.
While the unemployment rate has edged up to 4.2 percent during the three months to June, marking a 0.3 percentage point increase from the previous quarter, wages have shown remarkable growth at their fastest rate since record-keeping began.
The ONS report highlighted that the unemployment rate, the highest since October 2021, has breached pre-pandemic levels. The number of payrolled employees did increase by 97,000 to reach 30.2 million in July. However, the ONS noted that this figure is subject to revision as more data becomes available in the upcoming months.
Chancellor Jeremy Hunt expressed his satisfaction at the record number of employees, attributing the growth to the government’s job market initiatives. He emphasised the significance of their ongoing reforms to bolster economic growth and enhance the job market, including the expansion of free childcare next year.
What about wage growth?
In contrast to the rise in unemployment, the UK’s wage growth has taken centre stage. The ONS revealed that regular pay, excluding bonuses, registered a remarkable year-on-year growth rate of 7.8 percent, the highest since comparable records began in 2001. While the growth in real terms, adjusted for inflation (Consumer Prices Index including owner occupiers’ housing costs, or CPIH), was a modest 0.1 percent over the year, it marked the first real wage increase since October 2021.
However, when factoring in Consumer Prices Index (CPI) inflation, the overall measure still showed a 0.6 percent decrease on the year. This reduction represents the smallest decline since November 2021, indicating a gradual recovery in real wages after months of stagnation.
Pete Cooper, the Director of People, Partners, and Analytics at Personio, highlighted the complexity of the current labour market landscape. While unemployment figures suggest economic turbulence, he cautioned businesses against becoming complacent in their talent management efforts. He argued that despite wage growth, companies across sectors are grappling with skills shortages, rising costs, and subdued consumer confidence.
The consequences of high pay growth
Greg Marsh, CEO of Nous.co, which manages employees’ household bills to save them money, commented on the potential consequences of high pay growth. He warned that while wage increases might offer short-term relief, they could contribute to persistently high inflation and subsequent Bank of England interest rate hikes. He advocated for businesses to focus on offering workplace benefits that genuinely alleviate employees’ financial concerns.
Kate Shoesmith, REC Deputy Chief Executive, acknowledged the shifting dynamics in the labour market. She observed a nuanced balance between sectors where talent demand remains high and others experiencing a drop in demand. This intricate relationship poses challenges for both economic growth and workforce management. Shoesmith emphasised the importance of addressing wider issues, such as work models in sectors like health and care, and advocated for a comprehensive approach to workforce thinking.
The ONS figures underscore the delicate interplay between rising wages, unemployment rates, and broader economic conditions. As the UK navigates its path to recovery, policymakers and businesses alike must adopt a holistic approach that encompasses wages, working conditions, benefits, and overall economic strategies to ensure sustained growth and prosperity.
Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.
