The latest analysis reveals that the average worker’s weekly income has only increased by £3.80 compared to a year ago, as soaring living expenses have nearly offset the gains from higher wages, according to the Resolution Foundation.
The Office for National Statistics reported a rise in the UK’s unemployment rate to 5.1% in October, the highest level since 2016 outside the Covid pandemic. This rise in joblessness coincided with reports of businesses holding back on hiring due to uncertainties surrounding the recent budget and a national insurance hike, which dampened the demand for workers.
Despite the slowdown in wage growth, there is a glimmer of hope as the decrease in job vacancies seems to have stabilized, indicating a potential willingness among companies to resume hiring. Real wage growth, accounting for inflation, only saw a modest 0.5% increase in the three months leading up to October, with average weekly earnings rising by a meager £3.80 in real terms over the past year, a figure likened to the cost of a cup of coffee by the Resolution Foundation.
The prolonged wage stagnation, dating back to the aftermath of the 2008 financial crisis, has left millions of workers grappling with minimal pay increases. The uncertainty surrounding events like the Brexit vote and the Covid-19 pandemic further impeded real wage growth, with the latest forecasts suggesting continued stagnation in wages, projected to grow by just 2% until 2031.
Before adjusting for inflation, wage growth slowed to 4.6% in the October quarter, prompting experts to suggest a potential interest rate cut by the Bank of England to address the economic challenges. The ONS revealed a significant drop of 38,000 employees on payrolls in November, the largest decline in five years, underscoring the weakened state of the job market.
The ONS highlighted the struggles of younger workers in a tough hiring environment, with an 85,000 increase in unemployed individuals aged 18 to 24 during the three months leading to October, marking the sharpest rise since November 2022. Liz McKeown, ONS director of economic statistics, emphasized the ongoing weakening of the labor market, characterized by reduced hiring activity and a decline in job opportunities.
TUC General Secretary Paul Nowak stressed the importance of stimulating demand to spur job market recovery amid rising unemployment and slowing wage growth. Nowak called for the Bank of England to consider an interest rate cut to bolster the economy, making it easier for businesses to invest and households to spend, while emphasizing the need to support those out of work during the economic slowdown.