UK labour market contracts amidst Brexit uncertainty

 

UK labour market contracts

Wages are continuing to rise at their highest level for nearly a decade, the latest official Office for National Statistics figures published today show. However the evidence points to a steadily contracting labour market.

Average weekly earnings, excluding bonuses, went up by 3.3 per cent in the three months to October, the biggest rise since November 2008. Average weekly wages are £495, £25,740 a year, the highest since 2011, once adjusted for inflation. The number of people in work rose by 79,000 to 32.48 million, a record high. That is the highest figure since records began in 1971.

Unemployment increased by 20,000 to 1.38 million, although the margin of error is 70,000 and the total is still lower than a year ago. The number of unemployed men increased by 27,000, while the number of unemployed women fell by 8,000.

The reason both employment and unemployment have increased is a result of the UK’s rising population and more people joining the labour force, such as students and older people.

Job vacancies were up by 10,000 on the quarter to a record high of 848,000. More than half, 195,000, of the 329,000 jobs created in the year to October went to people who are no longer economically inactive, who are the main reason for the expansion in the workforce. There are fewer students, people who are not working because of caring responsibilities, long-term sick and retired people in the 16 to 64 age group than a year ago.

ONS senior statistician, Matt Hughes, said,

Real earnings are now growing faster than at any time since around the end of 2016

Employment Minister, Alok Sharma, said,

Today’s statistics show the enduring strength of our jobs market, with wages outpacing inflation for the ninth month in a row and employment at a record high.

Shadow work and pensions secretary, Margaret Greenwood, said,

The reality behind these figures is that the number of people in work in poverty is rising faster than employment. Real wages are still lower than they were 10 years ago.

Fears that the labour market is tightening were expressed by the CBI’s Matthew Percival. Mr Percival said,

There is a record employment rate and a rising number of jobs that can’t be filled. While pay growth is improving at its fastest and most sustained rate in a decade, this is still slower than the UK has achieved in the past.

TUC general secretary, Frances O’Grady, said:

The rise in pay growth is little consolation for workers in the middle of the longest pay squeeze in 200 years, with real wages expected only to get back to pre-crisis level in 2024. We need a plan that supports jobs and wages.

Ian Brinkley, acting chief economist at the CIPD, commented,

While the labour market has seen some growth in employment, and a very slight rise in unemployment, it is getting steadily tighter. This implies that labour and skill shortages will increase and recruitment and retention may become more challenging. However, these pressures stand to significantly increase if the current uncertainty over Brexit deters more migrants from coming to the UK and net migration from the EU continues to fall.

Wage growth has edged up slightly driven by the finance and business service sector. Real earnings have also strengthened. Historically, real wage growth and productivity growth have gone hand in hand, but it remains to be seen if rising real wages will also be reflected in better productivity figures in the months ahead, given the current Brexit crisis.

It’s vital that employers look at how they can invest in skills and adopt the right people management practices to boost productivity in their organisation and the UK overall.

Lee Biggins, founder and managing director of CV-Library, commented,

It’s a turbulent time for the UK economy right now, especially given yesterday’s monumental decision to delay the Commons vote on Theresa May’s Brexit deal. As a result, we expect the national employment rate to continue to strengthen in the face of this ongoing uncertainty. Despite this, businesses across the nation have continued to advertise their roles, with vacancies rising by 8.7% last month. However, this is largely because companies are struggling to find the talent they need.

What’s more, while our October data revealed a 15% increase in application rates, no real progress around Brexit has caused candidate appetite to once again slow down as we approach the end of the year. Because of this, businesses across the nation have been forced to push up their advertised salaries in a bid to attract candidates. In fact, CV-Library data revealed that salaries had reached a 12-month high in November, increasing by a staggering 28.9% when compared with figures from the same period last year.

 

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