UK maintains record employment today, and lower inflation promises more pay growth tomorrow

The UK looks set to start the new decade with employment at a record high and with its long overdue pay recovery continuing, as easing inflationary pressures mask a slowdown in nominal pay growth, the Resolution Foundation says today (Tuesday) in response to the ONS latest labour market statistics.

Following a series of record-breakers in 2019, the UK employment rate has hit another high in the three months to November at 76.3 per cent.

The Foundation also notes that self-employment has driven 40 per cent of the recent jobs boom, suggesting that while the labour market is tight, many more workers are vulnerable to a slowdown than the headline figures suggest.

The Foundation says that the tight labour market has helped drive up pay growth over the course of 2019, despite weakening wider economic growth. This pay recovery is long overdue too, as workers are still earning £1 per week less than they did before the financial crisis.

The Foundation notes however that the labour market has not escaped the effects of the UK’s slowing economy, with nominal pay growth dropping for the fourth consecutive month to 3.4 percent. Fortunately for households, easing inflationary pressures mean that real pay growth remained at a relatively healthy 1.8 per cent – and the pay recovery should continue into 2020.

Nye Cominetti, Economic Analyst at the Resolution Foundation, said:

“The UK ended the 2010s with a strong jobs market, and this trend looks set to continue into 2020 with the highest employment rate since records began in the 1970s.

“However, today’s news comes with the caveat that we’ve yet to resolve the challenges of the last ten years. We’re still earning £1 per week less than before the financial crisis, and the rise of atypical work remains a concern.

“Low inflation should bring better news next month in terms of a pay rise, but the UK’s sluggish economic growth puts long-term, much needed pay growth at risk.”