Ryan FowlerThe latest data from the Office for National Statistics (ONS) reveals a mixed picture for the UK job market from January to March this year. Before accounting for inflation, wages rose by 6% year-on-year excluding bonuses and 5.7% including them. However, after inflation, wage increases were more modest at 1.7% including bonuses and 2% excluding them, as inflation rates have fallen.
The employment landscape shows a rise in unemployment to 4.3% and a drop in the employment rate to 74.5%, while economic inactivity has increased to 22.1%. The data also notes a decline in redundancies and a consistent reduction in job vacancies across multiple industries, marking the 22nd consecutive decline.
Sector-specific data highlighted that pay growth was stronger in the public sector at 6.3%, compared to 5.9% in the private sector. However, disparities remain pronounced, with significant variations in wage increases and job security across different sectors.
Sarah Coles, head of personal finance at Hargreaves Lansdown, commented on the implications for individuals: “The job market is horribly divided, and the gaps are growing. On one side are those in secure jobs, particularly in the manufacturing and finance sectors, who benefit from higher wages and bonuses. On the other side are individuals facing job losses and lower-than-inflation pay rises, notably in the construction sector, where the risk of financial instability is increasing.”
Coles further advised on financial preparedness: “It’s crucial to consider how you would manage if you lost your job, particularly those currently enjoying strong pay rises and bonuses. Maintaining an emergency fund covering 3-6 months of essential expenses is advisable, alongside reassessing pension contributions and savings strategies.”
Michael Stull, managing director of ManpowerGroup UK, added: “Several entrenched and complex issues are characterising the state of the UK’s labour market right now. Unemployment and economic inactivity each present growing cause for concern, with unemployment at 4.3% and the economic inactivity rate for those of working age remaining at an elevated 22.1%. These are the headline reasons for our likening of today’s market to an iceberg, with what is happening at a deeper level requiring urgent attention. As we get closer to the iceberg, increased unemployment, skill shortages, wage pressure and heightened levels of inactivity are becoming increasingly apparent. Even with last week’s GDP numbers indicating the economy is slowly recovering, redundancies abound, job vacancies and applicant rates both remain high, and employers are still encountering chronic skills shortages and talent mismatches.
“In the battle for talent, wage rises are stubbornly high and worrisome given the current lower levels of inflation and productivity levels, with wages in some cases being further inflated for certain roles and sectors because of competitive skills requirements. While productivity levels across the UK remain low, even with inflation coming down and a much-anticipated interest rate cut expected later this year, the road to further economic growth and competitiveness remains a rocky one.
“Will unemployment and economic inactivity levels come down? Yes – but only if there’s a concerted effort to accelerate the UK economy by increasing collaboration between Government and business to make the right decisions; and being prepared to take risks by further investing for the future growth we’re aspiring towards. We also need to look beyond the numbers and evolve the financial cushions and pathways needed to get people into work, as well as reskilling and upskilling programmes to move more workers into specialised roles, for which there continues to be high demand.”
