Wage growth slows again, and there’s a growing divide

The Office for National Statistics (ONS) has released employment and wage data for the year to September-November.

Current wage growth has slowed, and if it continues at the current pace, wages will be up 2.8% in a year.  Wages in September-November were up 6.6% in a year before inflation, excluding bonuses, and 6.5% with bonuses. After inflation, wages rose 1.3% with bonuses and 1.4% without.  Private sector pay growth was 6.5%, the highest since the summer of 2022. Public sector pay growth was 6.6%, down from 6.9% the previous month and significantly lower than 12.5% in June-August.

The unemployment rate stands at 4.2%, largely unchanged on the quarter.  The employment rate increased by 0.1 percentage points to 75.8%, while the economic inactivity rate fell by 0.1 percentage points to 20.8%.  The estimated number of jobs (including self-employment) in December decreased by 24,000 to 30.2 million.

Vacancies in October-December fell by 49,000 in the quarter to 934,000, marking the 18th consecutive fall, the longest ever recorded. However, they remain above pre-pandemic levels.

Sarah Coles, Head of Personal Finance at Hargreaves Lansdown, notes that wage rises have slowed, and the UK is making up ground more slowly than earlier in the year.  According to HL Savings & Resilience Barometer, disposable income is expected to end the year lower than before the pandemic, and the cost of living has risen by 18.4% in the past two years.

There is a notable divide in experiences of the cost-of-living crisis among different sectors. For instance, wages in the wholesale, retail, hotels, and restaurants sector are up 7.2%, while construction wages are at 4.5%.  The cost of food and non-alcoholic drinks has risen almost 24% since the start of the cost-of-living crisis, impacting lower-income individuals more significantly.

The Barometer reveals a growing gap between the highest and lowest earners, with lower-income individuals falling further behind and facing a growing debt problem.

The Office for Budget Responsibility is pessimistic about the future employment outlook, predicting unemployment rates to reach 4.7% at the end of next year, 5% the year after, and 5.1% by the last quarter of 2026, with these increases expected to last longer than previously anticipated.



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