Further labour market cooling leaves big question over how long Britain’s mini pay recovery will last
Continuing fall in employment and vacancy levels mean that a big question going into the autumn is how long Britain’s mini pay recovery will last, the Resolution Foundation said today (Tuesday).
The latest pay, vacancies and employee jobs data from the ONS – crucial data on employment, unemployment and inactivity will be published next Tuesday – showed further evidence of labour market cooling.
The number of employee jobs fell slightly over the summer (down 13,000 between June and August), and the number of vacancies fell for the 15th consecutive month to 988,000 (though they remain above pre-pandemic levels).
The big question is how much this cooling will feed into future pay growth. Headline annual pay growth remains strong – regular average weekly earnings grew by 7.8 per cent in the three months to August, compared to the same time last year, and by 1.1 per cent in real terms.
However, there are signs that pay growth may already be starting to cool. Monthly private sector pay growth has fallen to 0.4 per cent in each of the past three months – down from an average of 0.9 per cent in the previous four – and that pay is actually falling in the more recent RTI data.
The Foundation adds that the wider labour market data due next week will be needed for policy makers to make a firmer judgement on the state of the labour market, and what that means for the future path of interest rates. The quality of this data will be crucial.
Hannah Slaughter, Senior Economist at the Resolution Foundation, said:
“Following yet another painful squeeze in recent years, pay packets have staged a mini recovery this year. But with the labour market continuing to cool, the big question going into this autumn is how long this recovery will last.
“Employment and vacancy levels continued to fall over the summer, while the pace of private sector pay growth has slowed.
“Fast falling inflation should help to prop up real pay packets even as the labour market cools down, and monetary policy makers face a tough judgement on the future path of interest rates.”