UK jobs market resilient but high inflation stops workers getting ahead

interactive investor's Myron Jobson comments on the ONS labour market overview.

Commenting, Myron Jobson, Senior Personal finance Analyst, interactive investor, says: “The job market has been a powerhouse in the years since the coronavirus pandemic and remains remarkably resilient with few signs of deterioration. 

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“The employment rate is up on the quarter and up on the year, and is still below pre-pandemic rates - with the redundancy rate also down. The economic inactivity rate, which featured heavily in the Spring Budget with a flurry of announcements made to tackle the issue, was also lower than the previous three-month period but remains above pre-pandemic rates. Meanwhile, while the unemployment rate crept up slightly on the quarter, it is down on the year, and is still below pre-pandemic rates.

“The ongoing shortage of staff at UK plc means jobseekers remain in the driving seat, handing workers elevated power to negotiate for higher pay and search for better positions. The growth in regular pay remains among the highest seen outside the Covid-19 pandemic period. But the job market supply bottlenecks have fuelled the inflation fire, and called into question whether workers are truly getting ahead. After taking inflation into account, wages total pay (including bonuses) fell by 3% and 2.3% for regular pay as rising prices continued to strip buying power away from households. This represents the largest fall in real total pay in 14 years and is among the biggest falls in growth since comparable records began in 2001.

“The difference between private and public sector growth rates has narrowed in recent months. Average regular pay growth for the private sector was 6.9% versus 5.3% in the public sector. It may simply be that the private sector firms have more wiggle room in their budgets to offer candidates and existing staff the pay they need to attract and retain talent in the red-hot labour market. But the growth in public sector pay isn’t insignificant. It is the largest hike in pay outside the pandemic period since 2005.

“The post-pandemic hiring sugar rush has shown further signs of abating, with job vacancies falling on the quarter for the ninth consecutive period in January to March 2023. Job openings have fallen in 13 out of 18 industry sectors, suggesting that many employers are reining in their recruitment over concerns of the UK’s economic picture and as high inflation continues to pummel their bottom lines.”