The latest analysis shows that the average worker’s weekly income has only increased by £3.80 compared to a year ago. This minimal gain has been overshadowed by a significant rise in living expenses, according to findings by the Resolution Foundation.
In parallel, the Office for National Statistics reported a rise in the UK’s unemployment rate to 5.1% in October, marking the highest level since 2016 outside the pandemic period. Factors contributing to this uptick in joblessness include employers’ cautious approach to hiring, possibly influenced by the recent Budget and a national insurance hike.
Despite these challenges, there is a glimmer of hope as the decrease in job vacancies seems to have stabilized, hinting at potential renewed recruitment efforts by businesses. While wage growth has slowed down, average earnings are still managing to slightly outpace inflation.
Real wage growth, accounting for inflation, saw a mere 0.5% increase in the three months leading up to October. Over the past year, the rise in average weekly earnings in real terms has been a modest £3.80, described as barely enough to cover the cost of a cup of coffee by the Resolution Foundation.
The aftermath of the 2008 financial crisis has left many workers grappling with stagnant wages for over a decade and a half. The Foundation highlighted that even when real wage growth resumed, it was sluggish, impacted by events like the Brexit vote and the COVID-19 pandemic. Forecasts suggest that this stagnation in wage growth is likely to persist, with wages projected to grow by a meager 2% until 2031.
Before adjusting for inflation, wage growth slowed to 4.6% in the three months leading up to October, as reported by the ONS. This deceleration in pay increases is anticipated to support arguments for the Bank of England to consider interest rate cuts.
Furthermore, recent data revealed a significant drop of 38,000 employees on payrolls in November, marking the largest decline in five years, signaling further weakening in the job market. Younger workers, particularly those aged 18 to 24, have been disproportionately affected, with an 85,000 increase in unemployment in this age group over the same period.
Liz McKeown, ONS director of economic statistics, highlighted the ongoing decline in the labor market, with fewer job opportunities and an increase in unemployment rates, particularly among younger age brackets.
TUC General Secretary Paul Nowak emphasized the importance of stimulating demand in the economy, calling for a reduction in interest rates by the Bank of England to support investment and consumer spending. With the economic slowdown impacting the labor market, he stressed the necessity of providing adequate assistance to those currently unemployed.