Yahoo Finance UK wage growth lags behind inflation as cost of living squeeze continues
Incomes in Britain saw their biggest squeeze since 2014 in the three months to December as UK wage growth slowed.
According to the latest data from the Office for National Statistics (ONS) on Tuesday, wage growth came in at 3.6%, down from a previous 3.8%, adding further pressure on incomes amid concerns over a cost-of-living squeeze.
This lagged behind UK inflation which hit 5.4% in the 12 months to December, and is expected to climb above 7% by April when the energy price cap rises.
After adjusting for recent rises in consumer prices, real total pay fell in the year to October-December 2021, despite a strong recovery in bonuses. Average wages excluding bonuses fell 1.2% - the biggest decline in almost 8 years.
It came as UK unemployment remained steady at 4.1% during the quarter. Although the jobless rate was unchanged, as widely expected by economists, this figure still sits above pre-pandemic levels of 3.8%.
The highest unemployment rate estimate in the UK was in the North East at 5.6%, while the lowest was in Northern Ireland at 2.7%.
Both Yorkshire and The Humber, and the East Midlands, saw record lows in the unemployment rate at 3.8 and 3.4 percentage points respectively, with the East Midlands also recording a record low level (82,000 people).
The number of people claiming jobless benefits fell to 31,900 in January when compared to 51,600 previously. The claimant count rate came in at a steady 4.6%.
Total hours worked increased slightly compared with the previous three-month period but are still below pre-coronavirus levels, despite the loosening of COVID restrictions.
Following an increase in the employment rate since early 2012, the rate decreased from the start of the pandemic in December 2019 to February 2020. However, there has been an increase since the end of 2020.
The number of part-time employees decreased strongly during the health crisis, but has been increasing since April to June 2021, driving the increase in the employment rate during the latest three-month period.
Meanwhile, the number of self-employed workers remained low following decreases through the pandemic.
Read more: Studio Retail collapses into administration with 1,000 jobs at risk
“The number of employees on payrolls rose again in January 2022 and is now well above pre-pandemic levels. However, our Labour Force Survey shows the number of people in employment overall is well below where it was before COVID-19 hit. This is because there are now far fewer self-employed people,” Sam Beckett, ONS head of economic statistics, said.
“The survey also shows that unemployment has fallen again and is now only fractionally above where it was before the pandemic. However, over the same period, nearly 400,000 people, mostly the over-50s, have disengaged from the world of work altogether and are neither working nor looking for a job.”
The number of job vacancies in November 2021 to January 2022 also rose to a new record of 1,298,400, an increase of 513,700 from its pre-coronavirus January to March 2020 level.
However, the rate of growth in vacancies continued to slow down, the ONS said.
Read more: JD Sports fined over £4m for breaching CMA order in Footasylum takeover
In addition to this, in the quarter to December, reports of redundancies decreased by 1.2 per thousand compared with the previous three-month period to a record low of 2.6 per thousand employees.
Suren Thiru, BCC head of economics, said: “Record vacancies underscore the critical hiring crisis facing firms. With high economic inactivity indicating that many people have left the jobs market altogether, chronic staff shortages are likely to weigh on the UK economy for a sustained period.
“While Omicron is having little impact on employment, the squeeze on firms’ finances from high inflation, soaring energy bills and the looming national insurance hike is likely to weaken job creation and further restrain pay growth in the coming months.
He added: “The government must do more to help people access rapid retraining opportunities for in-demand jobs, including helping older workers to pivot to more sustainable jobs. Delaying the looming National Insurance rise would give firms the financial headroom to retain and recruit people.”
Watch: How does inflation affect interest rates?
