Britain’s job recovery falters, but its mini pay recovery continues

The UK’s economic slowdown last year has caused Britain’s jobs recovery to falter, with its post-pandemic workforce shrinking by the equivalent by the equivalent of one million workers. But this hasn’t yet fed through into pay packets, with real wages growing at their fastest in rate in over two years, the Resolution Foundation said today (Tuesday).

While most major economies have already surpassed their pre-pandemic employment rates, the UK’s employment recovery has been flat or falling for the past six months, and the current 16-64 employment rate of 74.5 per cent is closer to the pandemic employment low of 74.1 per cent than the pre-pandemic rate of 76.2 per cent. Britain’s post-pandemic workforce has shrunk by the equivalent of one million workers.

This employment fall isn’t just about lower participation – demand from employers is also weakening. Vacancies continue to fall, and unemployment has risen in the past four months, rising 0.5 percentage points to its current rate of 4.3 per cent. The number of employee jobs in HMRC’s PAYE data has fallen for three months in a row.

However, the fall in employment has not yet fed through into pay packets, with real wages growing at a healthy rate of 2 per cent in the twelve months to March 2024 – the fastest growth since September 2021.

In fact, real wages have grown almost as much as in the past twelve months as they have done over the previous 16 years in total (2.1 per cent between February 2008 and February 2024).

Nye Cominetti, Principal Economist at the Resolution Foundation, said:

“Britain’s jobs recovery continues to falter, with the workforce shrinking by the equivalent of one million workers since pre-pandemic times. This worrying employment fall shows the damage that an economic slowdown can cause.

“The news for those in work is more positive however, with real wages growing almost as much over the past 12 months as they did in the 16 years prior to this.

“The big question is whether the UK’s recent economic recovery will boost employment and raise output per worker, which will be needed to sustain its mini pay recovery.”