UK pay picked up less than prices at the end of last year while job vacancies rose to a record and the unemployment rate hit a pandemic low.
Average weekly earnings, excluding bonuses, grew at an annual rate of 3.7 per cent in the final quarter of 2021, data published by the Office for National Statistics showed on Tuesday. However, prices were rising faster than pay, which meant that wages fell 0.8 per cent in real terms.
This is despite a tight labor market. The number of job vacancies in the three months to January rose to a record 1,298,400, an increase of 513,700 from its pre-coronavirus January to March 2020 level.
The number of employees based on HMRC real time data also increased by 108,000 between December and January to a record 29.5mn.
Sam Beckett, ONS head of economic statistics, said that the number of employees on payrolls rose in January 2022 and is well above pre-pandemic levels. However, he noted that the number of people in employment overall is below where it was before the Covid-19 hit. “This is because there are now far fewer self-employed people,” he said.
The unemployment rate decreased by 0.2 percentage points in the quarter to 4.1 per cent.
The number of people in employment also fell 38,000 in the three months to December compared to the previous quarter, the first contraction since the start of last year. This was a smaller contraction than the 65,000 forecast by economists polled by Reuters.
Unemployment and employment both fell because many people left the labor force during the pandemic.
“Nearly 400,000 people, mostly in the over-50s, have disengaged from the world of work altogether and are neither working nor looking for a job,” Beckett said.
The Bank of England expects unemployment to start rising from the second quarter and pick up to 5 per cent. It also forecasts wage growth to moderate this year as demand weakens due to the largest squeeze in real incomes in 30 years as a result of surging energy costs and higher taxes.
Yael Selfin, chief economist at KPMG UK, said that the “latest data show the labor market has understood the temporary setback triggered by Omicron”.