UK earnings growth remained at its highest level since last April and vacancies rose for the first time in more than two-and-a-half years despite worries over incoming wage cost pressures on firms, official figures have shown.
The Office for National Statistics (ONS) said regular average wages growth was unchanged at 5.9 per cent in the three months to January, staying at the highest level since the three months to April last year.
Wages outstripped Consumer Prices Index inflation by 3.2 per cent, the ONS added.
In an encouraging sign, the ONS said vacancies rose by 1,000 to 816,000 in the three months to February, which is the first rise since the quarter to June 2022.
There was also some optimism in the more real-time payroll figures, showing 21,000 more workers on UK payrolls last month to 30.4 million, after increasing by 9,000 in January.
It comes despite a number of firms warning over job losses and price rises ahead of the incoming increase in national insurance contributions and the minimum wage rise due to take effect next month.
The UK unemployment rate remained unchanged at 4.4 per cent in the three months to January, although the ONS reiterated caution over the statistic due to an overhaul of the nation’s jobs survey.
Liz McKeown, ONS director of economic statistics, said: “Overall, pay growth remains relatively strong, with pay growth high in both the public and private sectors, despite the latter slowing slightly in the latest period.
“The wider labour market picture is relatively unchanged, with the number of employees on payroll broadly flat in the latest period and with little growth seen over much of the last year.”
Reacting to the data, Suren Thiru, ICAEW Economics Director, said:
“These figures suggest that the UK’s jobs market had little momentum even before next month’s twin hit of rising National Insurance and National Living Wage costs, as free-falling business confidence continues to curtail recruitment activity.
“Elevated wage growth is a double-edged sword for the economy because, while it’ll help boost consumer spending – a key driver of economic growth – it may limit the pace of interest rate cuts by fuelling fears over rising inflation.
“The UK’s labour market may soon slide into choppier waters as April’s sizable surge in business costs and a flagging economy could well trigger both moderately higher unemployment and weaker pay settlements.”
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, added: “UK pay growth remained resilient in the three months to January, despite the jobs market coming under strain as businesses brace for chancellor Rachel Reeve’s minimum wage increase and the National Insurance rate hike for employers set to take effect from the start of the new financial year in April.
“Business leaders have warned that the Chancellor’s decision for employers to shoulder the majority of the tax rises announced in her maiden Budget last October is threatening the health of the labour market. The jobs market showed some signs of strain with unemployment holding at 4.4 per cent in the three months to January, while the number of payrolled employees fell on the quarter. Interestingly, vacancies remained broadly the same between December to February, with hints of a slight increase, after more than 30 consecutive periods of falling numbers – perhaps a reflection of the start of the year when job openings typically ramp up.
“When you consider the inflationary impact the Chancellor’s impending tax measures will have for businesses, with a number of major companies already announcing plans to pass on rising costs to consumers, the outlook from here for household budgets is far from rosy. Add in the hit from rising household bills, with energy, water and council tax charges all set to go up from April 1 along with rising concerns about job and income security and households are likely to be feeling very worried once again.
“One comforting factor for workers is that wages are still rising faster than inflation [but] many people may not feel their wages are going further in real terms, however, as frozen income tax thresholds – set to remain in place until at least 2028 – mean they are being drawn deeper and deeper into higher rates of tax.
“In uncertain times, keeping personal finances in order is key for consumers. Losing a job can derail household finances that don’t have adequate reserves in place. Building a robust emergency fund that can cover the household bills during any periods without earned income, cutting back on expenditure, paying down expensive debts and even signing up for income protection are sensible ways to ease financial worries, particularly for households with no back-up funds to protect them.”
