Growth in employment has slowed over the last year, according to the latest figures released today (13 February) by the Office For National Statistics (ONS).
The number of payrolled UK employees rose by 1.3% – or 401,000 – between the end of December 2022 and the end of December last year. It also increased by 0.1% (31,000) between November and December last year, which marks a growth slowdown.
However, the early estimated number of payrolled employees for January rose by 0.2% – or 48,000 compared to the end of December, an increase of 1.4% (413,000) over 12 months to 30.4 million.
The labour market is also tightening, with job vacancies falling by 26,000 over the last quarter. However, they remain above pre-pandemic levels.
The UK employment rate for those aged between 16 and 64 stands at 75%, which marks an uptick both over the quarter and over the year. According to the ONS, however, this remains below last year’s estimates. The unemployment rate for the same age category also fell over the last quarter, returning to levels last seen between October and December 2022.
The number of economically inactive people within the bracket remained unchanged at 21.9%, although the number of people suffering from long-term sickness, rendering them unable to work, has reached historically high levels.
Hugh Gimber, global market strategist at JP Morgan Asset Management, said the data will be “welcome news to consumers” overall, with wage growth now rising above inflation for a seventh consecutive month.
“After a torrid 18 months – where surging energy costs saw inflation significantly outpace wage gains – it’s no surprise that the more recent combination of easing price pressures and still tight labour markets has driven UK consumer confidence to its highest level in two years,” he said.
“But the Bank of England will be viewing this data through a different lens. The recent trend lower in inflation, while good news, has largely been driven by a collapse in goods prices. The key watch item for the Bank lies in whether consumption reaccelerates as consumers find their feet. This would be good for growth but would also present upside risks to inflation, particularly in services sectors where prices tend to be more closely linked to wages.
“As a result, with today’s print pointing to some signs of slowing in a still-strong labour market, significantly more evidence of cooling is likely required before the Bank is ready to consider cutting rates.”
Richard Hunter, head of markets at Interactive Investor, pointed out that the fall in unemployment surpassed market expectations.
“However, pay growth which is in itself inflationary, rose by more than expected by both measures of regular earnings plus a figure which includes bonuses,” he explained. “The number could further muddy the waters for the Bank of England, where a relatively resilient jobs market would not normally be a catalyst for considering interest rate cuts, and where inflation remains some way away from the Bank’s own target.”