Home Business NewsBusiness Record breaking wage growth but signs labour market tightness is receding

Record breaking wage growth but signs labour market tightness is receding

by LLB Editor
11th Jul 23 8:55 am

Unemployment is up 0.2% to 4%, new job figures out today showed.

Regular pay (ex-bonus) is up 7.3% in the largest growth since 2001.

‘Economically inactive’ return to workplace but that number is still higher than pre-pandemic.

Danni Hewson, AJ Bell head of financial analysis, comments on the latest UK jobs figures: “No one can blame cash-strapped workers asking for a bit more in their pay packets so they can try and keep their living standards in the same ballpark they’ve become used to.

“And at 7.3% those increases might seem chunky on paper, but in real terms inflation is chomping through those extra pennies and leaving households substantially worse off.

“With mortgage rates spiralling the cost-of-living crisis is evolving, and many people who’d been able to tread water thanks to savings or a decent level of discretionary income are now feeling the increasingly painful squeeze.

“Both the chancellor and the governor of the Bank of England will be chilled by today’s numbers which have been released just hours after both spoke of the need for pay restraint if inflation’s sticky fingers are to be prized from the UK economy.

“Employers have been in a quandary with the labour market incredibly tight since Covid lockdowns ended. Bosses haven’t wanted to lose skilled labour even as wage increases have wreaked havoc with margins that are already shrinking as prices have shot up.

“But as calls for wage restraint ring in our ears there are signs that the labour market is changing. Vacancy numbers have continued their steady decline and more people are looking for work.

“Among the group classed as ‘economically inactive’ there has been a shift, and there will be speculation that inflation weariness has forced a good chunk of those who hadn’t been looking for work back into the rat race.

“The UK economy has been resilient and high employment has played a huge part in fostering that resilience. But if recession is really necessary to stamp out inflation’s smouldering embers, there are signs that it is creeping closer.

“Markets expect interest rates to go higher, mortgage payers are marching towards fixed rate renewal dates with a sense of dread, and employers are nervous.

“The mood music is changing and pretty soon bad news won’t be in the lining of good news, it will just be bad news.”

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