Pay surges by six percent as job vacancies shrink by 12,000 places

British workers enjoyed a six percent growth in their regular pay in the three months from February to April 2024, compared to last year.

When adjusted for inflation, regular real pay was 2.3 percent for the period, the highest it has been since June to August 2021, when it was 3.34 percent, according to figures from the Office for National Statistics (ONS).

The finance and business services sector saw particular growth, with regular pay increasing 6.9 percent, while those working in construction had the smallest pay increase, at 2.9 percent.

Average weekly earnings for April 2024 were £687 for total earnings and £640 for regular earnings.

The figures showed median monthly pay for May 2024 was at £2,379, up 5.2 percent compared to a year ago.

There has also been a drop in vacancies over the past months, with a decrease of 12,000 or 1.3 percent, from December 2023 to February 2024.

Vacancy numbers have declined from the March to May 2024 quarter, marking the 23rd consecutive period when vacancies have fallen.

The ONS said in its analysis that the number of payrolled employees "shows little change in 2024".

Nicholas Hyett, Investment Manager at Wealth Club, said the latest figures indicate now is the time for the Bank of England to start cutting interest rates.

He said: "Falling employment, rising unemployment and rising economic inactivity do not paint a pretty picture of the UK labour market. Falling vacancies makes those numbers particularly concerning, suggesting there is a genuine lack of demand for staff.

"There are some redeeming features - real wage growth for instance remains north of two percent year-on-year - but this is, nonetheless, precisely the kind of sign the Bank of England has suggested it's been waiting for to start cutting interest rates.

"Counterintuitively that would come as a relief to houseowners, potentially a rare bit of good news for the government in a so far lacklustre election campaign. In reality though it probably comes too late to influence house prices ahead of polling day."

Early figures for May 2024 suggest there were 30.3 million payrolled workers, an increase of 0.6 percent compared to the previous year, with 167,000 extra people in work.

Early estimates for May 2024 indicate that median monthly pay was £2,379, an increase of 5.2 percent compared with the same period of the previous year.

Total pay growth for the public sector was at 6.4 perent from February to April, while private sector average earnings increased 5.8 percent.

In May 2024, median worker pay increased the most in the accommodation and food services sector, growing 9.8 percent compared to a year ago.

Luke Bartholomew, deputy chief economist at abrdn, said: "UK wage growth remains very strong, but with further evidence that the labour market is cooling, this report is unlikely to significantly change the thinking at the Bank of England.

"We expect the first rate cut in August, but that is dependent on further progress on bringing down underlying inflation pressure over the next few months.

"But for now, with wage growth significantly outstripping inflation, the ongoing rise in unemployment should not be enough to upset the UK’s modest growth rate."

Rebecca Florisson, principal analyst with the Work Foundation at Lancaster University, warned that living standards have dropped in recent years.

She said: "There are signs that the wage growth recovery has peaked.

"Despite real wages rising by 2.3 percent on the year, the economic impact of the Covid-19 pandemic and the war in the Ukraine has made this the first Parliament since 1955 where living standards have declined.

"The reality is that most people are feeling poorer than when they last voted in the last General Election nearly five years ago."

She pointed out that more than a fifth (22.3 percent) of working age adults are not looking for work, with high levels of economic activity a pressing issue for the next Government.

She commented: "Grasping the challenge of high levels of economic inactivity – and how it impacts the exchequer, the welfare system and the health of the nation – will be one of the most pressing tasks facing the next Government.

"Over the coming weeks, political parties should focus on how to support more people into sustainable employment, rather than on binary measures of increasing employment or reducing unemployment that ignore the quality and security of jobs available for jobseekers.

"Instead, their manifestos must prioritise de-risking the journey back into work, through high quality employment support and designing jobs that offer people adequate reward, security, flexibility and progression."

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