The most recent figures from the Office for National Statistics (ONS) show that the inflation rate in the United Kingdom rose to its highest level in eight months – 2.6% in the year to November. Driven by rising petrol, clothes, and concert ticket costs, the rise is the highest inflation growth pace since March and fits Bank of England estimates.
Although inflation is always a worry, the economic situation has given some encouraging news for workers as wages are rising faster than prices. Offering financial comfort among rising expenses, the ONS said that regular pay grew at an annual pace of 5.2% between August and October. For many workers, this increase in actual pay marks a change towards more financial stability.
Inflation and Wage Trends
While the Retail Prices Index (RPI) increased to 3.6% from 3.4% in the previous month, the Consumer Prices Index (CPI) measure of inflation rose to 2.6%. The leading causes of the rise were fuel, clothes, and entertainment expenses, underlining continuous pressure in leisure and basic categories.
Despite rising inflation, wage growth has remained resilient. With an annual rate of 5.4%, private sector pay grew faster than public sector pay, which rose by 4.3%. Pay experts at Brightmine also showed that median basic pay rises for 2024 settled at 4.5%, a little down from 6% in 2023. Notably, 2.6% of pay awards this year were wage freezes, which indicates continuous economic difficulties in some sectors.
Strong private sector performance mostly drove the strength of pay growth, excluding bonuses. While one-off public sector payouts distorted results in 2023, wage growth in the most recent period shows a steadier and more stable trajectory.
Labour Market: Stable Employment but Rising Unemployment
The ONS’s most recent Labour Market Overview indicated that the UK employment rate for those aged 16 to 64 was 74.9%, remaining relatively stable compared to the previous year, with a little enhancement from the preceding quarter. The unemployment rate for those aged 16 and over rose to 4.3% in the three months ending in October, representing an increase from the previous quarter and the same period last year.
The number of vacancies decreased by 31,000 to 818,000 in the quarter ending November. This is the 29th consecutive interval of declining job opportunities, a pattern that highlights diminishing demand for labour. Nonetheless, vacancies remain higher than pre-pandemic levels, indicating that job possibilities, while declining, have not reverted to historical lows.
Job listings on Indeed reflected this pattern, with a persistent fall until early December across almost all professions, including typically low-paid positions in hospitality and retail. This weakening indicates challenges for industries dependent on flexible and seasonal labour forces.
Payrolled Workforce Trends
Though the job market shows conflicting signals, projections for payrolled employees offered a glimpse of stability. Between September and October, paid employee numbers rose by 24,000 (0.1%), which helped to generate a total growth of 140,000 (0.5%) over the year. The quarterly numbers presented a different picture; from August to October, the payrolled labour count dropped by 22,000 (0.1%).
This mix of quarterly declines and yearly increases draws attention to the disparate rate of recovery among various sectors of the workforce. While some sectors experience some employment growth, industries facing fundamental difficulties, like retail and hospitality, continue to face workforce declines.
Given the combination of growth and uncertainty in the changing work market, people must prioritise financial planning. Understanding financial objectives is a fantastic place to start; next, look for meaningful and gratifying jobs consistent with their hobbies and beliefs.
Balancing Inflation and Interest Rates
The inflation surge has resulted in fresh demands for the Bank of England to give interest rate reduction top priority in an attempt to stimulate economic growth. At the meeting on December 19, the Bank is under increasing pressure to reconcile reducing inflation with helping firms and households amid declining economic growth.
Although rising wages have lessened the impact of more expensive living, companies will pay prizes in the following months with a careful approach. Businesses are juggling the lack of assistance staff and preserving financial viability as median pay settlements for 2024 are trending lower than in 2023.