UK wages fall below inflation as jobless rate declines

UK wages: Average total pay, including bonuses, grew by 4.2% in the quarter to November, while basic pay without bonuses was 3.8%. Photo: Christopher Furlong/Getty

UK wage growth lagged behind inflation in November, with workers facing a looming cost of living crisis.

According to the latest figures from the Office for National Statistics (ONS), real average weekly earnings fell in November for the first time since July 2020.

Average total pay, including bonuses, grew by 4.2% in the quarter to November, while basic pay without bonuses was 3.8%.

In comparison, consumer price inflation (CPI) soared to 5.1% in November and is forecast to hit as high as 6% this spring when energy bills are set to rise. After inflation, total pay was up by just 0.4% and regular pay was level.

The ONS revealed that public sector workers were hit by the pay squeeze in particular.

Average total pay growth for the private sector was 4.5% in September to November, while it was 2.6% for the public sector.

Watch: What is inflation and why is it important?

However, all sectors saw some growth, with the finance and business services sector seeing the largest growth rate at 6.8%.

“Inflation has waged war on pay and in November, salaries actually slid once inflation was taken into account. This has piled on the pressure for those struggling through the cost of living crisis, and things are going to get even worse,” Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said.

“This has been devastating for anyone whose finances were already on a knife edge. We’ll get inflation figures for December on Wednesday, but there’s every chance we’ll see it rise again — pushed up by not just by runaway energy and petrol prices, but relentless increases in the price of almost everything — from fresh food to home repairs.”

It comes as the UK unemployment rate declined in the three months to November as employers continued to add workers to their payroll.

The jobless rate fell to 4.1% during the period, the ONS revealed, down from 4.2% a month ago. It was the best reading since June 2020.

Read more: Revealed: UK’s most in demand jobs

The highest unemployment rate estimate in the UK was in the North East of England at 5.7%, and the lowest was in the East of England with 2.7% — a record low unemployment rate and level for the region.

This was also the case for Yorkshire and The Humber (3.8%), while the East Midlands also saw a record low unemployment rate for the region at 3.5%.

The strong unemployment numbers are likely to encourage further interest rate rises from the Bank of England (BoE), which meets to make its decision next month.

The data also showed that employers added 184,000 staff members last month, meaning that payroll figures were above pre-pandemic levels at 409,000, or 1.4%.

On a regional level, all areas sat above pre-COVID levels, with Scotland having the largest percentage increase on the month.

The data showed that employers added 184,000 staff members last month, meaning that payroll figures were above pre-pandemic levels at 409,000, or 1.4%. Chart: ONS The data showed that employers added 184,000 staff members last month, meaning that payroll figures were above pre-pandemic levels at 409,000, or 1.4%. Chart: ONS

The data showed that employers added 184,000 staff members last month, meaning that payroll figures were above pre-pandemic levels at 409,000, or 1.4%. Chart: ONS

Vacancies also hit a record high, with more than 1.25 million job openings in October through to December. Although this was 462,000 more than before the start of the pandemic, the rate of growth in vacancies did slow, the ONS said.

Meanwhile, inactivity in the quarter rose to 8.78 million, an increase of 66,000, and there were 459,000 fewer people in work than at the end of 2019.

Jake Finney, economist at PwC UK, said: “Further challenges lie ahead. The Omicron variant has intensified labour shortages, with some of the hardest hit sectors, such as accommodation and food services, seeing as many as 6-7% of their workforce on sick leave or not working due to COVID-19 in late December.

“At the same time, consumer demand has fallen as some decide to avoid shops and restaurants while cases are high. While this may ease some of the current pressures on businesses that are struggling with labour shortages, it could set back the labour market recovery if firms respond to lower demand by cutting back on hiring in the coming months.”

Read more: UK hiring and job vacancies rise sharply

Elsewhere, Trades Union Congress (TUC) general secretary Frances O’Grady, called on ministers to get pay packets rising.

“We urgently need to get pay packets rising across the economy — or too many families will have to choose between paying soaring bills or putting food on the table.

“Ministers must give unions more power to go into workplaces and negotiate better pay and conditions, give our public sector workers a decent pay rise, and get the minimum wage up to £10 an hour immediately.”

Watch: Will interest rates stay low forever?