Economic Slowdown Is Reducing Employment, But Isn't Yet Affecting Workers' Pay Packets

20th December 2024

The UK's jobs market continues to cool amidst a wider economic slowdown, but pay growth remains resilient, the Resolution Foundation said today.

The Foundation’s analysis using the latest HMRC admin data suggest that the 16+ employment rate has fallen to 61.1 per cent, down from 61.7 per cent in early 2023. Further evidence of a cooling labour market can be seen in employee jobs, which have fallen by 47,000 over the past six months (from May to November 2024).

Firms are still hiring though - at a rate of 600,0000 jobs per month. While down slightly on pre-pandemic levels (of 650,000 jobs per month), there are no signs of an uptick in people leaving the jobs market and redundancies are also at normal levels. However, this rate of hiring is not enough to keep up with a growing workforce, says the Foundation.

Pay packets also remain resilient. Private sector wages grew by 5.4 per cent in cash terms in the three months to October, while public sector wages grew by 4.3 per cent. Overall, average weekly earnings grew by 2.2 per cent in real terms over this period.

Finally, the Foundation notes that the poor quality of the headline data in today’s release means that the ONS is under-estimating the real level of employment by at least half a million workers, and therefore over-estimating levels of unemployment and/or economic inactivity.

Hannah Slaughter, Senior Economist at the Resolution Foundation, said, "Britain’s jobs market is continuing to cool amidst a wider economic slowdown. The number of people in work is starting to fall, and business confidence is weak.

“But there are also signs of resilience. Firms are still hiring at a respectable rate and pay packets are still growing. The big living standards question for 2025 will be whether hiring and wage growth can continue to boost household incomes, or if they’ll tail off with the rest of the economy."