11 July 2023
If you are covering the UK labour statistics, please see the following comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“The UK labour market remains very tight, and this morning’s ONS jobs data shows the employment rate saw an uptick of 0.2% percentage points higher than December 2022 to February 2023 estimated at 76.0% in February to April 2023. The number of people in employment increased to a record high in the latest quarter with increases in both the number of employees and self-employed workers.
“Due to the Bank of England still grappling with stubborn inflation, the base rate is now 5%, piling more pressure on the economy and in turn businesses will start to struggle. This should start to slow wage growth as businesses simply do not have the spare cash available to provide bump ups in salaries and employees also start to feel less confident in their job security so are less likely to push hard for a raise. Similarly, companies will be less likely to advertise for new roles as they try to keep costs at a minimum. Wage growth tends to be a lagging indicator, so while today’s data show wages have continued to climb it should start to slow but for now the ONS reports growth in employees' average total pay (including bonuses) was 6.9% and growth in regular pay (excluding bonuses) was 7.3% in March to May 2023.
“The Bank of England will be studying this data carefully as this will feed into its decision on when to curb interest rate rises in the future. On the face of this data we still have not quite reached the end of the hiking cycle yet.
“The rate of economic inactivity has dropped by 0.4% to 20.8% in March to May 2023 but even so this will still set some hares running in government. The UK government continues to try and tempt people back into work but with finances squeezed to the limit it may be that those who can return to work will be forced to. So by hook or by crook the government will ultimately get what it wants as older workers return to the workforce following a post pandemic lull.”
