UK wages drop by 2.7% as unemployment rises – ‘country edges closer to recession!’ | Personal Finance | Finance
The country’s unemployment figures for August to October 2022 rose by 0.1 percentage points for the quarter to 3.7 percent. Between September to November 2022, the projected number of vacancies decreased by 65,000 to 1,187,000. At the same time, total and regular pay has fallen by 2.7 percent in real times over the space of the year, when adjusted for inflation.
The fall in real wages by 2.7 percent is one of the largest drops since comparable records began.
It should be noted the number of vacancies in the UK remain at historic levels, even with five consecutive quarterly falls.
Furthermore, growth in average total pay, including bonuses, and regular pay, excluding bonuses, for employees was the same at 6.1 percent during August to October.
In terms of regular pay, this represents the strongest growth rate seen outside of the COVID-19 pandemic.
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These statistics come amid the UK’s ongoing cost of living crisis, which is being exacerbated by rising inflation and energy bills.
To mitigate the damage on the economy by inflation being at a 41-year high, the Bank of England’s Monetary Policy Committee (MPC) has raised the country’s base rate to three percent.
Interest rates have risen in recent years which has benefited savers but seen those with mortgage and debt payments have to pay more.
Experts are sounding the alarm that the UK “edges closer to recession” as a result, with today’s unemployment and real wages figures likely to compound the problem.
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Alice Haine, a personal finance expert at Bestinvest, broke down what today’s statistics mean for the UK economy and British workers.
Ms Haine explained: “Britain’s jobless rate edged up to 3.7 percent in the three months to October while vacancies fell for a fifth quarter in a row indicating that employers are increasingly concerned about the economic outlook as the country edges closer to recession.
“Pay growth remained strong with regular pay, excluding bonuses, and total pay, including bonuses, both rising 6.1 percent in the three-month period – though this was deeply negative in real terms once inflation of 11.1 percent is factored in.
“This means real wages dropped 2.7 percent in the three months to October for real and total pay.”
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Workers are being told to brace for another interest rate by the Bank of England later this week on December 15, 2022.
Financial analysts are expecting the base rate to be hiked by at least 50 basis points but are not ruling out an increase of 0.75 percent.
This comes as the latest Consumer Price Index (CPI) rate of inflation figures have reached 11.1 percent.
A prolonged recession is also expected by the central bank following GDP contracting 0.3 percent in the three months to October.
Tom Stevenson, investment director for personal investing at Fidelity International, added: “Sandwiched between yesterday’s slightly better than expected GDP data and what are likely to be marginally more encouraging inflation figures tomorrow, today’s labour market snapshot shows a country looking anxiously at a difficult year ahead.
“Businesses and households face a tough 2023 of stagnant or falling real wages, rising unemployment and a persistent cost of living crisis.
“For investors the key question is when the stock market starts to look through this gloomy outlook to better times in 2024.
“One of the cheapest markets in the world has already priced in a great deal of the economic pain that lies ahead.”
