The latest analysis shows that the average worker’s weekly income has only increased by £3.80 compared to a year ago, largely due to a surge in living expenses offsetting wage growth. The Resolution Foundation highlighted this trend, noting that despite a slight rise in wages, the impact has been minimal due to escalating costs of living.
In parallel, recent data from the Office for National Statistics unveiled an uptick in the UK’s unemployment rate to 5.1%, the highest level since 2016 outside the pandemic period. This rise in joblessness was attributed to employers delaying hiring decisions in anticipation of economic uncertainties, including the effects of the recent Budget and a national insurance hike.
However, there are signs of optimism as the decline in job vacancies appears to be stabilizing, hinting at a potential rebound in hiring activities. While wage growth has decelerated, average earnings are still marginally outpacing inflation, with real wage growth registering a modest 0.5% in the three months leading to October.
The Resolution Foundation also pointed out that many workers are still grappling with the aftermath of the 2008 financial crisis, enduring prolonged wage stagnation over the past fifteen years. The organization emphasized that even when real wage growth resumed, it was sluggish, further disrupted by events such as the Brexit vote and the COVID-19 pandemic. Projections suggest that this stagnation in wage growth is likely to persist, with a forecasted total wage increase of only 2% by 2031.
The ONS reported a slowdown in wage growth to 4.6% in the three months to October, prompting expectations of a potential interest rate cut by the Bank of England to stimulate economic activity. Additionally, a notable decrease in the number of employees on payrolls during November, the largest drop in five years, underlined the weakened state of the job market.
Furthermore, younger workers faced challenges in securing employment, with a substantial increase of 85,000 unemployed individuals aged 18 to 24 in the three months leading to October – the sharpest rise in nearly a decade. Liz McKeown, ONS director of economic statistics, highlighted the persistent weakening of the labor market, characterized by subdued hiring activities and a rise in unemployment rates, particularly among younger age groups.
TUC General Secretary Paul Nowak emphasized the importance of boosting demand in the economy to address the rising unemployment rates and slowing wage growth. He called for further support from the Bank of England through an interest rate cut to facilitate increased investment by businesses and higher consumer spending. Additionally, he stressed the necessity of providing adequate assistance to those who are currently unemployed to navigate the ongoing economic challenges.