Millions of workers are experiencing a salary squeeze at a time when the job market is deteriorating. According to data from the Office for National Statistics, average wage growth slowed to 3.4% year-on-year in the first quarter of the year. Private sector pay growth dropped to 3%, while public sector pay stood at 4.8%.
With inflation reaching 3.3% and expected to rise further due to the economic impact of the conflict in the Middle East, experts are cautioning that many workers may face a decrease in real wages. Additionally, the weakening job market is making it challenging for employees to negotiate for pay increases that match inflation.
The ONS data revealed that the unemployment rate rose to 5%, and the number of job vacancies decreased to 705,000, the lowest level since the onset of the Covid crisis. Excluding the pandemic period, job openings are at their lowest in over a decade.
In March, the number of people in payrolled jobs declined by 104,000 year-on-year, with estimates indicating a further drop of 210,000 in April. The claimant count for individuals receiving out-of-work benefits rose on a monthly basis but decreased compared to the previous year, totaling an estimated 1.699 million.
Economists are observing a strain on the labor market, with declining vacancies, decreasing payrolled employment, and a rising jobless rate signaling the impact of increasing costs and uncertainty on businesses.
Given the slowdown in pay growth, experts anticipate that the Bank of England will maintain interest rates next month. The current economic challenges have led to concerns about falling real wage growth and the potential for increased discontent within the workforce.
Despite the challenging labor market conditions, economists believe that the UK is less likely to experience wage-price spirals similar to those following Russia’s invasion of Ukraine, which may influence the Bank of England’s decisions on interest rates.
