The UK job market is exhibiting signs of slowing growth, as indicated by a decline in wage growth and a decrease in the number of job vacancies, according to official figures. Pay growth, excluding bonuses, fell from 7.3% to 6.6% in the three months to November. Additionally, the number of job vacancies dropped for the 18th consecutive time, with the retail sector experiencing the sharpest decline despite the approach of the crucial Christmas trading period. Several major recruitment companies, including Page Group, Hays, and Robert Walters, have noted weakening confidence among employers.
While job vacancies remain above pre-pandemic levels, economists suggest that slowing pay growth could signal further challenges in the labor market. Yael Selfin, chief economist at KPMG UK, mentioned that the unique factors driving pay growth, such as strong demand for workers and higher pay demands to cope with the rising cost of living, have diminished in recent months.
She anticipates a further decline in job vacancies, potentially leading to pay growth falling towards 2% by the end of the year, which could support the case for interest rate cuts.
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The Bank of England is closely monitoring the UK job market, considering whether to cut interest rates as inflation continues to outpace the bank’s 2% target.
While real wages have grown for five consecutive months, there are signs that the labor market is softening, with the unemployment rate holding steady at 4.2%. The Bank of England has kept interest rates at 5.25%, a 15-year high, and will weigh the impact of a potential rate cut on inflation, currently at 3.9%.
Chancellor Jeremy Hunt expressed satisfaction with real wage growth but noted that unemployment remains higher than a year ago, signaling softening in the labor market.
