Pay growth slows but still outpaces rising prices

Wage growth slowed again in the British jobs market but is still outpacing price rises, official figures show.

Pay, excluding bonuses, grew by 6.2% in the last three months of 2023 compared with the same period a year before, according to the Office for National Statistics (ONS).

After taking price rises into account, pay went up by 1.9%.

But the statistics watchdog has said it could not guarantee the reliability of jobs market data.

The ONS is currently updating how it gathers information about employment, but this will not be fully in place until September.

The governor of the Bank of England, Andrew Bailey, has said that the ONS figures are the Bank's only way to gauge unemployment, so their current unreliability is "posing challenges" as policymakers weigh up what to do about interest rates in the coming months.

The Bank has been raising rates steadily over the past couple of years to try to reduce inflation, with the last rate rise in August 2023.

Higher interest rates cool inflation by making borrowing more expensive, discouraging people and firms from taking on debt to fund spending.

As higher rates have hit business and household finances, pay growth has been slowing from the highs seen last summer and the number of job vacancies has been falling too.

Wage growth data will be watched closely by the Bank's Monetary Policy Committee, which sets interest rates. But it will want to see more evidence of a tougher jobs market in order to avoid making cuts it may need to backtrack on later.

According to the latest figures, wage growth in Britain fell from 6.6% to 6.2%, slightly higher than economists had expected.

The number of vacancies fell for the 19th time in a row, down 26,000 to 932,000 in the three months to January.

However, there were some signs that the downward trend in job vacancies could be slowing, Liz McKeown, director of economic statistics at the ONS, told the BBC's Today programme.

The latest unemployment figures also suggest that the jobs market remains fairly resilient.

The unemployment rate across the UK fell to 3.8% in the final three months of 2023, down from 3.9% in the three months to November. It marked the lowest level seen since the November 2022 to January 2023 period.

Chancellor Jeremy Hunt said: "It's good news that real wages are on the up for the sixth month in a row and unemployment remains low, but the job isn't done.

"Our tax cuts are part of a plan to get people back to work so we can grow the economy - but we must stick with it."

Ms McKeown pointed out, though, that the new figures suggest there are historically high numbers of people saying they are long-term sick and unable to work or look for a new role.

Tony Wilson, director of the Institute for Employment Studies, said this rise in inactivity has happened despite rising salaries and the number of vacancies remaining above pre-pandemic levels.

"It reiterates the need for us to do far more to help people out of work to get into work, more to help people struggling in work to stay, and more to help employers fill their jobs. Otherwise weaknesses in our labour market will continue to hold back economic growth and widen social and economic inequalities," he said.

Liz Kendall MP, Labour's shadow work and pensions secretary, said that the higher number of those who are out of work due to long-term illness was "costing taxpayers billions more a year in spiralling benefit bills".

She added that Labour would "tackle the root causes of worklessness by driving down NHS waiting lists, reforming social security" and "making work pay".

Sarah Coles, head of personal finance at Hargreaves Lansdown, suggested that there are some other signs of weakness "creeping into" the jobs market.

She pointed out that there has been a rise in redundancies in recent months, which "could be a blip, but it is well worth watching to see whether more structural weakness in the jobs market is on the way".

How the economy performs will be a key focus in the run-up to a General Election due this year.

Some of Prime Minister Rishi Sunak's key pledges last year focussed on tackling inflation and growing the economy and analysts are predicting that the chancellor is poised to cut some income taxes in a bid to win favour with voters.

1. Search beyond a 40-mile radius - Remote, hybrid and flexible working open up opportunities further away.

2. Use key words in your searches - Online algorithms will pick up on daily searches and send you more of the same.

3. Don't wait for a job to be advertised -Contact a manager at a business that you like the look of as you never know what opportunities might be coming up.

4. Sell your skills -Use social media sites like LinkedIn which showcase your skills and experience. Other platforms like Twitter and Instagram can prove useful when touting yourself out to potential employers as well.

5. Get learning -While you're on the hunt for a job see if there are way to fill gaps in your CV with free courses, volunteering or shadowing.

6. Celebrate the small wins -Set personal targets, like a tracker of the number of jobs to apply for in a week or a certain number of cold emails and acknowledge the little wins along the way to keep your spirits up.

You can read tips from careers experts in full here.

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