Yahoo Finance UK pay growth jumps as unemployment rate rises
The UK unemployment rate ticked up as total pay growth rose faster than expected, with public pay growth jumping by the largest amount since 2005.
The UK unemployment rate for December 2022 to February 2023 increased by 0.1 percentage points on the quarter to 3.8%, according to the Office for National Statistics (ONS)
The increase in unemployment, the ONS said, was driven by people unemployed for up to six months.
Total pay, including bonuses, grew at an annual rate of 5.9% in the three months to February, up from 5.7%.
However, when excluding bonuses, pay growth was unchanged from an upwardly revised pay growth figure of 6.6% for the three months to January.
Headline indicators for the UK labour market for December 2022 to February 2023 show:
▪️ employment was 75.8%
▪️ unemployment was 3.8%
▪️ economic inactivity was 21.1%
➡️ https://t.co/H74cWKP7vB pic.twitter.com/En2dMzowGd— Office for National Statistics (ONS) (@ONS) April 18, 2023
Average regular pay growth for the public sector was 5.3% from December to February, compared to growth of 6.9% in the private sector.
The increase of 5.3% in average regular in the public sector is the biggest increase since 2005, outside the COVID pandemic.
Despite all these increases pay in real terms is falling across the board as wage packets are eaten up by inflation, which currently stands at 10.4%.
Divya Sridhar, economist at PwC UK, said: "Inflation-adjusted total pay fell annually by 3% in the three months to February 2023, recording one of the sharpest declines in real earnings since comparable records began in 2001."
Darren Morgan, director of economic statistics at the Office for National Statistics (ONS), said: “With the number of people neither working nor looking for a job down again, there were rises in both those in work and those actively looking for a job.
“However, while the group outside the labour market — termed ‘economically inactive’ — fell, the number among them who were long-term sick rose to a new record high.
“Job vacancies have fallen again but remain at very high levels.
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“Meanwhile, pay continues to grow more slowly than prices, so earnings are still falling in real terms, although the gap between public and private sector earnings growth continues to narrow.
“The number of days lost to strikes picked up again in February, after January’s sharp fall, albeit not to the levels seen before Christmas.
“Once again education was the most affected sector, accounting for over three-fifths of the total.”
In March, the number of staff on payrolls rose by 31,000, to 30 million. In January to March 2023, the estimated number of vacancies fell by 47,000, to 1,105,000. That’s the ninth consecutive fall in a row, going back to May to July 2022.
The number of employees on the payroll rose by 31,000 in March 2023 and is now 986,000 above its pre #COVID19 pandemic level.
➡️ https://t.co/i4DJr99mZx pic.twitter.com/0bOhvboPFq— Office for National Statistics (ONS) (@ONS) April 18, 2023
Although vacancies are still high in historic terms, it suggests firms are more cautious about hiring as economic growth has stumbled.
Alice Haine, personal finance analyst at Bestinvest, said: “Britain’s unemployment rate rose to 3.8% in the three months to February, a clear sign the red-hot employment market of the post-pandemic era — when job vacancies soared and severe staff shortages became the norm — is now cooling as economic uncertainty weighs on employers’ recruitment plans.
"Britain’s unemployment rate may still be ultra-low, but with rapidly rising interest rates, slowing growth, sticky inflation, and employers still facing pressure to increase wages amid trickier business conditions, the nation’s labour market is at a turning point."
There were 348,000 working days lost because of labour disputes in February 2023, up from 210,000 in January 2023.
Over three-fifths of the strikes in February were in the education sector, the ONS says.
Strikes by teachers, and civil servants, were one reason why the UK economy failed to grow during the month.
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UK chancellor Jeremy Hunt said: "While unemployment remains close to historic lows, rising prices continue to eat into pay cheques which is why halving inflation this year is one of our top economic priorities.
"To help families in the meantime, we are making work pay with a record increase in the National Living Wage, while providing cost of living support worth an average of £3,300 per household this year and last, funded through windfall taxes on energy profits."
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