The UK saw the slowest growth in average salaries in five years, even though the job market remained steady, according to recent data from the Office for National Statistics (ONS).
Despite concerns about the spread of COVID-19 and its potential impact on the economy, the unemployment rate remained unchanged at 3.9% in the three months to February. This signifies the lowest level of joblessness since the early 1970s.
However, coupled with the promising employment figures is a disappointing slowdown in pay growth. Regular pay, excluding bonuses, rose by 2.8% on an annual basis in the three months to February, marking the weakest pay growth since the three months to September 2015.
This pay growth slowdown may not seem calamitous on the surface, but when real wage growth (which takes into account inflation) is considered, it reveals a more pressing concern. With inflation currently standing at 1.5%, the real wage growth dropped to just 1.3% over the same period.
Commenting on the data, David Freeman, the ONS’s Head of Labour Market Statistics, highlighted that the situation is not as bleak as it might initially seem. “The economy held up well in the run-up to the coronavirus restrictions, with the labour market very little changed in the early part of 2020, with a continued near-record employment and unemployment rate,” he said.
Inspecting the data further reveals that there were slight variations within sectors. The most significant drop in wages over the year was experienced by employees in the finance & business sector, where wage growth fell to 1.1% in the three months to February, whilst the health & social work sector saw the highest wage growth at 3.5%.
Meanwhile, the number of people in employment increased by 275,000 in the first quarter of 2020. Job vacancies, however, saw a drop to 795,000, down from 817,000 in the three months to January 2020.
The ONS also disclosed figures for the zero-hours contract workforce, which fell to a seven-year low of 896,000, suggesting a trend towards more stable employment.
Despite the distressing figures on wage growth, economists suggest that this slowdown could potentially be a buffer against future shocks in the labour market. Variations in wage growth across sectors could indicate employers preparing for potential challenges, by adjusting pay accordingly.
Tom Stevenson, investment director for personal investing at Fidelity International, stressed that the slowdown in wage growth is preferable to an increase in unemployment. He added, “It is evidence of the flexibility that has been a hallmark of the UK labour market since the financial crisis. If firms can reduce their wage bill without firing people, the UK may be able to avoid the worst impacts of recession.”
In all likelihood, these employment figures will fluctuate given the imminent economic turmoil anticipated due to the COVID-19 pandemic. The resilience displayed by the labour market thus far has been heartening, yet it remains to be seen how it cascades in the months to follow as the real effects of the pandemic lockdowns across the globe are felt.
While the government-approved furlough scheme should cushion some of the impacts, ensuring a degree of stability in the labour market, the longer-term outlook is undoubtedly uncertain, and challenging times lay ahead.
The ongoing fluctuation in both employment and wage growth figures highlight the volatility that the UK and global economies face in these unprecedented times. As we continue to navigate the challenges presented by the COVID-19 pandemic, it becomes increasingly clear that the economic landscape will be reshaped, potentially leaving a lasting mark on the labour market.
Original Source: https://hrreview.co.uk/hr-news/jobs-labour-market/pay-growth-hits-five-year-low-as-jobs-market-holds-steady/387043
