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Salaries continue to fall in real terms despite unemployment levels at historic lows

The BBC reported today that the number of people out of work due to long-term illness hit a record high. Their report follows recent labour market statistics published by the Office for National Statistics (ONS) this morning.

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Published 11 October 2022

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Despite the rise in economic inactivity due to long-term sickness, the ONS statistics show that unemployment was at 3.5% during the period of June to August, a drop of 0.3% than the previous quarter and reportedly the lowest rate since June 1974.

The statistics also show that despite some 69,000 more people were added to payroll in September as compared to August, the UK still had 1,246,000 job vacancies.

With unemployment down and still a significant number of vacancies floating about, there is optimism that workers will be able to weather the current economic storm. However, the large and long-term nature of these job vacancies is suggestive of bigger problem within the labour market and for the future of supply chains.

The spectre of inflation also remains and, despite the positive employment data, the ONS found that on average total pay in real terms actually fell by 2.4% when adjusted for inflation. This will undoubtedly hit people on lower-income the hardest. The government is hoping its contributions to household energy bills for the next six months (starting on 1 October) will decrease inflation by at least 5 percentage points and help to reduce its impact on already squeezed wages.

We are yet to see whether interest rate rises and new government policies will have their desired effect to bring inflation under control.

You can read our comments in the October 2022 Evening Standard article here.

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Longer Reads

Salaries continue to fall in real terms despite unemployment levels at historic lows

The BBC reported today that the number of people out of work due to long-term illness hit a record high. Their report follows recent labour market statistics published by the Office for National Statistics (ONS) this morning.

Published 11 October 2022

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Authors

Despite the rise in economic inactivity due to long-term sickness, the ONS statistics show that unemployment was at 3.5% during the period of June to August, a drop of 0.3% than the previous quarter and reportedly the lowest rate since June 1974.

The statistics also show that despite some 69,000 more people were added to payroll in September as compared to August, the UK still had 1,246,000 job vacancies.

With unemployment down and still a significant number of vacancies floating about, there is optimism that workers will be able to weather the current economic storm. However, the large and long-term nature of these job vacancies is suggestive of bigger problem within the labour market and for the future of supply chains.

The spectre of inflation also remains and, despite the positive employment data, the ONS found that on average total pay in real terms actually fell by 2.4% when adjusted for inflation. This will undoubtedly hit people on lower-income the hardest. The government is hoping its contributions to household energy bills for the next six months (starting on 1 October) will decrease inflation by at least 5 percentage points and help to reduce its impact on already squeezed wages.

We are yet to see whether interest rate rises and new government policies will have their desired effect to bring inflation under control.

You can read our comments in the October 2022 Evening Standard article here.

Associated sectors / services

Authors

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