The UK’s unemployment rate has increased, according to official figures, while the pace of pay growth has slowed.
The unemployment rate rose to 4.3% in the three months leading up to September, up from 4% in the previous quarter.
However, the Office for National Statistics (ONS) cautioned against over-interpreting these latest job figures due to data collection issues.
Despite the slowdown in wage growth, pay is still rising faster than inflation, which measures the rate of price increases.
Excluding bonuses, pay grew at an annual rate of 4.8% between July and September, marking the lowest increase in over two years.
The number of job vacancies also continued to decline, a trend observed for more than two years.
Minimum wage to rise to £12.21 an hour next year The women who forged the way for equal pay Homeworkers get 24 more minutes of sleep a day How quickly are prices rising in the UK? How last month’s Budget will affect you and your money Liz McKeown, director of economic statistics at the ONS, noted that total employment remains slightly above pre-pandemic levels.
She told the BBC’s Today programme that the figures indicated a “continued easing of the labour market.”
However, the ONS’s Labour Force Survey, which provides the jobs data, has experienced a lower response rate over the past year, raising concerns about its reliability.
The Bank of England closely monitors jobs data when making decisions on interest rates.
Last week, it cut rates for the second time this year, with inflation below its 2% target at 1.7%.
Ms McKeown acknowledged that the data issues were impacting the central bank and that efforts were underway to improve the situation.
The latest ONS figures are supported by anecdotal reports from businesses, many of which paused hiring ahead of the Budget due to rising costs.
Supermarkets such as Asda and Sainsbury’s, along with High Street giant Marks and Spencer, have reported significant cost increases due to the hike in National Insurance contributions (NICs) and the upcoming minimum wage increase from April, as outlined in Chancellor Rachel Reeves’ first Budget.
These tax increases have led to concerns among businesses about potential cuts in hiring, restricted wage increases, or higher prices.
While public sector pay awards granted by the government will be reflected in official figures throughout the year, economists warn that the forthcoming rise in employers’ NICs could pressure the private sector.
Alexandra Hall-Chen, principal policy adviser for employment at the Institute of Directors, stated that the measures in the Employment Rights Bill and tax increases were “taking a serious toll on hiring intentions.”
“The cumulative effect of these changes will ultimately stifle job creation… [the government] needs to urgently address business’ concerns about the increased risks and costs associated with employing staff,” she added.
‘If you want to retain staff, you need to increase pay’ Wendy Jones-Blackett, a designer and maker of handmade greeting cards from Chapel Allerton, near Leeds, employs seven workers. She expressed concern that companies she subcontracts for printing and storage would be more affected by the Budget decisions.
“The thing that we’re having to build in is that their costs are going to go up – their services and the things that we buy,” she said.
“It is going to make us question pay rises – if you want to retain good staff, you want to increase their pay. We want to do that but we’ll have to temper that with rising costs.”
A recent survey by the Recruitment and Employment Confederation and consultancy KPMG indicated that vacancies fell for the 12th consecutive month, suggesting a decline in demand for workers.
Rob Wood, chief UK economist at Pantheon Macroeconomics, said the Bank of England would focus on broader trends rather than “small data misses” by the ONS when considering its next interest rate decision.
“Unemployment is likely gradually rising, the labour market is loosening but it remains tight,” he said. “Similarly, wage growth is gradually slowing but remains too high still to deliver inflation sustainably at target.”
Other economists believe the latest ONS figures are unlikely to prompt the Bank of England to cut rates again in December.
Work and Pensions Secretary Liz Kendall emphasized the need for further efforts to improve living standards.
The Labour MP highlighted that from April, three million of the lowest-paid workers would benefit from an increase to the minimum wage, officially known as the National Living Wage.
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