Wage growth slows slightly as vacancies continue to fall

Annual wage growth continued to fall in the three months to September, but not as fast as was expected, according to official labour market statistics.

Pay growth excluding bonuses in the UK was 4.8% in the three months to September, down slightly from 4.9% in the previous rolling quarter, according to data from the Office for National Statistics (ONS). Some economists had expected the figure to be 4.7%.

Wages including bonuses increased by 4.3% on average, an increase on the three months to August (3.9%).

In the year to July to September 2024, the employment rate was largely unchanged at 74.8%, while unemployment increased to 4.3%. Economic inactivity decreased to 21.8%.

The number of job vacancies declined to its lowest level since May 2021, down 35,000 on the quarter to 831,000 in the three months to October.

Liz McKeown, ONS director of economic statistics, said: "Growth in pay excluding bonuses eased again this month to its lowest rate in over two years. Pay growth including bonuses increased, but for recent periods these figures have been affected by last year's one-off payments made to public sector workers."

Ben Harrison, director of the Work Foundation at Lancaster University, said: "While employment levels are stable, this masks that key indicators such as vacancies, wages and long-term sickness are stuck in reverse.

"Vacancies have decreased for the 28th consecutive month but remain 35,000 above pre-pandemic levels. With recent hikes to employer national insurance contributions and the minimum wage soon to take effect, we could see further cooling of the jobs market as some employers will lack confidence to employ more people as their overheads rise."

Rising concern

Matthew Percival, future of work and skills director, CBI, said: "The labour market continues to split with signs of employers' weakening intentions to hire at the same time as a welcome fall in inactivity. These figures come against a backdrop of rising concern about spiralling employment costs which are set to increase following last month's National Insurance Contribution (NICs) rise, the Employment Rights Bill and the latest increase in the National Living Wage.

"Over the coming months, it will be key for the government to work with business to ensure that these costs are manageable. When margins are squeezed too far, employers lose the headroom to pursue growth and a growing number are facing difficult decisions between cutting either investment or jobs."

Recruitment and Employment Confederation chief executive Neil Carberry said: "Today's labour market statistics confirm the cooling trend on pay and vacancies suggested by the business surveys. This shows that the Bank of England is right to go for a period of rate cuts as pay pressures have eased and growth needs to be the focus.

"Going for growth also means boosting business investment. Many businesses will be feeling bruised by the large increases to their employment costs in the Budget and Employment Rights Bill. Getting growth going is what makes changes more affordable, that's why firms will be looking for real change on industrial strategy, public service reform and skills."

Storing up trouble

Stephen Evans, chief executive at Learning and Work Institute, said: "A further troubling rise means there are now 1.2 million 16-24-year-olds not in work or full-time education. The employment rate of 18-24-year-olds not in full-time education has been falling for over two years.

"This is storing up trouble and risks long-term damage to their career prospects and the economy. The upcoming Get Britain Working white paper needs to show how the planned Youth Guarantee will be implemented so all young people are offered a job, apprenticeship or training place."

Harrison added: "If the UK government is to meet its intended 80% employment rate, it must act to address the high levels of long-term sickness that are keeping too many people out of the jobs market. Despite unemployment being at historically low levels, the UK has had over 2.7 million people out of the labour market due to long-term sickness since May-July 2023."