Wage growth has fallen to its lowest level in more than five years, with the jobs market remaining under pressure at the start of the year, according to official figures.
The Office for National Statistics (ONS) said regular earnings growth slowed to 3.8% in the three months to January, down from 4.2% previously and marking the weakest rate since November 2020.
Pay is now only just keeping pace with the cost of living, with earnings rising by just 0.5% after Consumer Prices Index (CPI) inflation is taken into account.
The unemployment rate held at a near five-year high of 5.2% in the three months to January. The ONS also reported that vacancies fell by 6,000 to 721,000 in the three months to February, signalling a continued cooling in labour demand.
Youth unemployment rose sharply, with the rate for 18 to 24-year-olds climbing to 14.5% — the highest level since early 2015. By contrast, unemployment among 16 and 17-year-olds edged down to 29.3%.
Despite the broader slowdown, the overall jobless rate came in slightly below expectations, with most economists having forecast a rise to 5.3%. There was also an estimated increase of 20,000 in payroll employment last month.
Liz McKeown, director of economic statistics at the ONS, said: “Labour market conditions were little changed at the start of the year.
“The number of workers on payroll rose slightly in the latest month but, overall, the recent picture has been broadly flat.”
She added: “Regular wage growth is at its lowest rate in more than five years, with pay growth in both the private and public sectors continuing to ease.”
Thomas Pugh, chief economist at RSM said: “The unemployment rate holding at 5.2% in January highlights just how weak the labour market was coming into the Iran crisis, and higher energy prices will only worsen that picture.
“That weakness will temper the likely hawkish shift from the Monetary Policy Committee this afternoon and is the key reason why we expect a prolonged hold if energy prices stay high, rather than rate rises.”
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