Robust pay growth defies weakening labour market

Responding to today’s ONS labour market figures, James Cockett, labour market economist for the CIPD, the professional body for HR and people development, comments:

“Today’s figures highlight an increasing disconnect between continued strong wage growth and the loosening labour market. This is characterised by slowly rising unemployment and falling vacancies, against a backdrop of weakening inflation. These factors suggest the power in the labour market is gradually shifting from workers to employers and this may start to feed into lower pay growth over coming months.

“Nominal pay growth remains stubborn at 6%, unchanged on last month. Falling inflation means there has continued to be a rise in real regular pay growth, now at 2%. Vacancies are now below 900 thousand, but still above the pre-pandemic level. We expect this level to continue to fall in 2024.

“We shouldn’t read into the month-to-month changes in the employment indicators due to the current reliability of estimates. But, taken as a whole, all indicators continue to point towards a slowing jobs market. With more people staying put, it will be important for employers to invest in workplace skills to support and develop their existing workforce.

“Inactivity due to long term sickness also remains unchanged. More than one in five people who are inactive due to long-term sickness want a job, meaning more employers should focus on providing flexible working, reasonable adjustments and access to occupational health support. The data also highlights the importance of the new WorkWell pilots to enable employees to access support such as physiotherapy or counselling to help them remain in or return to work.”