UK employment rate falls at fastest pace in four years while wages remain below 2008 peak

Job vacancies plunge, average pay growth slows and number of people in work falls at fastest pace since 2015

Ben Chapman
Tuesday 12 November 2019 10:25 GMT
Unemployment decreased by 23,000 to 1.3 million in the three months to September
Unemployment decreased by 23,000 to 1.3 million in the three months to September (PA)

The total number of people in work across the UK declined at its fastest pace in more than four years, between July and September, while average wages remained below the peak reached in 2008, official figures show.

The number of people in work declined by 58,000 to 32.75 million in the quarter, thanks to a rise in the number of economically inactive individuals, the Office for National Statistics says. The quarterly decline was the most since March 2015.

The fall in employment masked a rise of 100,000 people in full-time work that was cancelled out by a 160,000 fall in part-time jobs.

In a further sign that the jobs market may be weakening, the number of vacancies fell 53,000 to 800,000 in the three months to October compared to the same quarter a year ago. The annual drop is the sharpest since 2009.

Average pay growth also slowed, rising 1.7 per cent over the year to £470 per week when adjusted for the rising cost of living – still £3 less than the pre-recession high.

Further pay rises are likely to be constrained by the UK’s lacklustre productivity growth. Output for each hour worked did not increase at all in the latest quarter compared with a year ago as businesses continued to hold off on productivity-boosting investment.

TUC general secretary Frances O’Grady says: “Working families are thousands of pounds out of pocket after a decade of dismal pay growth. That is not right.

“The Conservatives have presided over the longest wage squeeze since Napoleonic times. They have nothing to boast about.”

Unemployment, which counts the number of people without a job who are actively looking for one, decreased by 23,000 to 1.31 million in the three months to September, taking the jobless rate down to 3.8 per cent.

However, the trend was upwards, from a low of 3.7 per cent in July to 4 per cent in August – still low by historic standards.

Low unemployment would typically translate into higher wages but Tej Parikh, chief economist at the Institute of Directors, says the wider economic situation meant businesses were unlikely to implement significant pay rises in the near future.

“With many firms facing elevated costs and difficulties raising their productivity game, the margins to raise pay are eroding,” he says. “A further acceleration in wages now looks unlikely.”

Geraint Johnes, professor of economics at Lancaster University says: “Taken together, these data provide further evidence that the labour market has probably peaked.”

Howard Archer, chief economic advisor to the EY Item Club says the “remarkably resilient” jobs market was now showing signs of buckling in the face of a struggling UK economy and heightened Brexit and domestic political uncertainties.

“The strong suspicion has to be that the labour market will falter further in the near term at least,” he says. “Any improvement seems unlikely until there is a decisive easing of uncertainties over Brexit and the UK domestic political situation.”

It follows figures, released on Monday, showing the UK economy grew at its slowest annual rate since the first quarter of 2010.

The UK avoided falling into a recession after the economy eked out 0.3 per cent growth in a sluggish third quarter – marred by Brexit uncertainty and a global slowdown.

There were further signs that will worry the prime minister and his chancellor, Sajid Javid. Much of the third-quarter growth came in a strong July, before the economy slowed to a 0.1 per cent contraction in September. All major sectors either flatlined or contracted during the month.

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