Workers enjoy best year for pay rises in two decades, even as the jobs market continues to cool 21 January 2025 The jobs market continued to cool in November, and there has now been no growth in payrolled jobs since May. But this cooling is yet to affect workers’ pay packets, who have enjoyed the best year for wage growth since 2005, the Resolution Foundation said today. The latest ONS data showed further evidence that the labour market is cooling. The number of employee jobs fell by 47,000 in December, following a sharp fall of 32,000 in November. Vacancy levels have fallen back to pre-2019 levels. With a fast-growing population, flat or falling employee jobs translates into a falling employment rate. The Foundation now estimate the 16+ employment rate to be 61.1 per cent. The rate has now fallen by 0.7 percentage points since its post-pandemic peak, equivalent to 374,000 fewer workers. It adds the official employment estimates continue to under-estimate job levels across the UK, but the gap is shrinking. The sobering news on the jobs front has yet to feed through into wages however. With December’s data still to come, real regular weekly pay excluding bonuses had already grown by 2.2 per cent by November 2024 – making it the strongest year for real wage growth since 2005 (excluding the pandemic period). The Foundation notes that the Britain’s ongoing productivity woes mean that pay rises are forecast to fall sharply in 2025 and over the rest of the parliament, contributing to weak income growth. But should wages continue to defy these expectations, and not simply feed through into high inflation, then the outlook for living standards could brighten. Nye Cominetti, Principal Economist at the Resolution Foundation, said: “Britain’s jobs market has been in decline throughout the second half of last year, mirroring the UK’s wider economic performance, with the number of employees have fallen consistently since May. “But these sobering economic trends have yet to materialise in workers’ pay packets. After decades of stagnation, 2024 was strong – real wages had already risen by a healthy 2.2 per cent by November last year – making it the best year for wages since 2005. “This unexpectedly strong pay growth could just turn out to be a blip, or reflect an unmeasured productivity gain. The more likely explanation though is that workers are trying harder to rebuild their pay packets after the high inflation of the past three years. “This is great news for workers, if they can get a job. But it’s less welcome for the Bank of England as it muddies the picture over whether or when to reduce interest rates.”
