UK unemployment rate rises and wage growth slows again – what it means for your money
THE UK rate of unemployment has risen while wage growth has eased, according to the Office for National Statistics (ONS).
Unemployment rose to 4.3% between July and September, from 4% for the previous three months.
Official figures released this morning have revealed that basic pay is still growing but at its slowest rate in two years.
Pay excluding bonuses stood at 4.8% in the three months to September.
Growth was previously lower than this in April to June 2022, when it was 4.7%.
Including bonuses, it was 4.3% impacted by the civil service one-off payments made in July and August 2023.
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It comes after statistics released last month showed the growth in employees' average total pay was 4.9% between June and August.
Wages are still continuing to outstrip inflation though.
In real terms, when adjusted for inflation real regular pay growth on the year held at 1.9% - as it was from June to August. Total pay stood at 1.4%.
Inflation is the rate at which the price of goods an services has increased over time, and is used to measure the cost of living.
The most recent data shows inflation dropped to 1.7% from 2.2% the month before.
The figures mean that wages are still growing but just at a slower rate than what was recorded before.
Commenting on today’s labour market figures, ONS director of economic statistics Liz McKeown said: "Growth in pay excluding bonuses eased again this month to its lowest rate in over two years. Pay growth including bonuses increased, but for recent periods these figures have been affected by last year’s one-off payments made to public sector workers."
Elsewhere, the ONS says the estimated number of vacancies in the UK from August to October was 831,000, down from 35,000, or 4%, from May to July.
There were 831,000 job vacancies from August to October, down 35,000 from the previous three months.
Vacancies decreased in the quarter for the 28th time in a row but are still 35,000 above pre-pandemic levels.
Meanwhile, the early estimate of payrolled employees for last month decreased by 5,000 - or 0% - on the month but increased by 95,000 - 0.3% - on the year, to 30.4million.
Ms McKeown added: "The number of people on payrolls fell slightly in September and while it remains up on the year, annual growth continues to slow.
"Job vacancies have fallen again, as they have been doing for more than two years now. However, the total still remains a little above where it was before the pandemic."
Although the ONS said the estimate should be treated with caution given the ongoing low response rates to its jobs survey.
Work and Pensions Secretary Liz Kendall said: "2.8 million people – a near record number are locked out of work due to poor health. This is bad for people, bad for businesses and it’s holding our economy back.
"That’s why our Get Britain Working plan will bring forward the biggest reforms to employment support in a generation, backed by an additional £240million of investment.
“While it’s encouraging to see real pay growth this month, more needs to be done to improve living standards too."
It comes after millions of workers will get a pay rise of £1,400 a year from 2025, Chancellor Rachel Reeves confirmed in her inaugural Budget.
The Government will boost the National Living Wage by 6.7% from April 1.
It comes less than a week after the UK's central bank, the Bank of England (BoE), reduced the base rate from 5% to 4.75%.
While this is good news for mortgage holders, many households won't be feeling hopeful for the winter.
What it means for your money
Alice Haine, personal finance analyst at Bestinvest by Evelyn Partners, the wealth manager, said the weakening jobs market data reflects the uncertainty companies faced in the run-up to the Budget on October 30.
Employers had been nervous about the tax and spending
changes Reeves might roll out, putting hiring decisions on pause.
She said: "Wages may still be rising faster than inflation, with real terms growth of 1.9% on regular salaries and 1.4% on total pay once inflation is accounted for, but pay growth is likely to slow in the
coming months as the effects of the Chancellor’s new tax measures eat into company spreadsheets.
"With the majority of the Chancellor’s £40billion in tax rises falling squarely on the shoulders of businesses, companies struggling to absorb the extra costs will be forced to make some very difficult
decisions."
It comes after some of Britain’s biggest employers issued stark warnings about the impact the Chancellor’s tax rises will have on businesses and jobs.
Ms Reeves announced a hike in the rate employers pay in National Insurance to 15% next April.
This coupled with lowering the threshold at which they start paying the tax on each employee’s salary delivers a "double blow" to businesses, Ms Haine explained.
She said: "Add in an uplift in the minimum wage for lower paid workers and companies may struggle to absorb the extra costs, something likely to lead to lower wage increases, job cuts and even the closure of smaller firms.
"It means workers may not only find themselves out of a job but also with fewer openings to source a new role from as reduced demand and hiring freezes impact recruitment."
She also said that some businesses may choose to pass on higher wage bills to consumers, raising fears that inflation might spike.
Ms Haine explained: "This will come as a blow to workers, who have already endured huge financial strain over the past couple of years.
"While it may be encouraging for now that pay packets are still stretching further than they did a year ago, employees who do manage to hang on to their jobs will find a larger share of their income gets swallowed up by tax as a result of fiscal drag."
This is due to most personal tax thresholds having either been frozen or cut, leading workers to be dragged into paying higher rates of tax as their pay goes up.
Job security will be a source of concern for employees as Christmas draws closer, she added.
Meanwhile, Ms Haine said keeping personal finances on track will remain "key" for households in the run-up to the more expensive festive season.
She said: "Building a robust emergency fund to cover any periods without earned income, paying down expensive debts and even signing up for income protection are all ways to soothe financial fears, particularly for households with no back-up funds, who may struggle should the worst happen, and the main breadwinner loses their job."
Why does inflation matter?
INFLATION is a measure of the cost of living.
It looks at how much the price of goods, such as food or televisions, and services, such as haircuts or train tickets, has changed over time.
Usually, people measure inflation by comparing the cost of things today with how much they cost a year ago. The average increase in prices is known as the inflation rate.
The government sets an inflation target of 2%.
If inflation is too high or it moves around a lot, the Bank of England says it is hard for businesses to set the right prices and for people to plan their spending.
High inflation rates also mean people have to spend more, while savings are likely to be eroded as the cost of goods is more than the interest we're earning.
Low inflation, on the other hand, means lower prices and a greater likelihood of interest rates on savings beating the inflation rate.
But if inflation is too low some people may put off spending because they expect prices to fall. And if everybody reduced their spending then companies could fail and people might lose their jobs.
See our UK inflation guide and our Is low inflation good? guide for more information
Luke Bartholomew, the deputy chief economist at abrdn, said the continued slowdown in wage growth will be most interesting to policymakers at the BoE.
He said: "The ongoing slowing in wage growth will give the Bank of England confidence that inflation pressures are broadly as expected.
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"Of course, the fiscal stimulus announced in the Budget and the likelihood of a material policy shift in the US does mean that all data might feel a little dated as we await the impact of these shifts."
He said that there's nothing to shift the Bank away from its plan of gradual rate reductions, which will likely see the next 25 basis points cut occur early next year.
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