UK wages are growing while job vacancies continue to fall, according to the latest official figures.

New data from the Office for National Statistics (ONS) showed annual average earnings increased to 5.9% in the quarter ending in December 2024 – a rise of 0.3% from the previous three-month period and the quickest increase since April 2024. Annual earnings growth including bonuses climbed from 5.5% to 6%.

Wages outpaced inflation measured by the consumer prices index by 3.4 percentage points between October and December last year, the figures revealed.

Earnings growth for the private sector was 6.2%, while in the public sector it was 4.7%.

The ONS found the number of job vacancies dropped for the 31st consecutive period in the three months to January, falling by 9,000 to 819,000. However, these are still above pre-pandemic levels.

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A revised estimate for December 2024 showed the number of employees on the payroll was down 14,000 from the month before. The figure showed an increase of 44,000 (0.1%) year-on-year.

A provisional estimate for January 2025 was up 21,000.

ONS director of economic statistics Liz McKeown said: “Growth in pay, excluding bonuses, rose for a third consecutive time, with increases seen in both the private and public sector. After taking account of inflation, real pay growth also increased slightly.

“The number of employees on payroll was broadly unchanged in the last three months of the year, continuing a medium-term trend of slowing growth. The number of vacancies also continued to fall in the latest quarter, albeit more slowly, with the total number remaining a little above its pre-pandemic level.”

However, she advised caution when interpreting the figures because although the number of people interviewed for the survey is once again higher this quarter, recent improvements to data collection are still feeding through to headline estimates.

Jack Kennedy, senior economist at Indeed, said: “Stagflation fears continue to stalk the UK economy as hot wage growth limits the dose of monetary medicine the Bank of England will likely be able to administer. The ailing labour market could use a shot in the arm amid warnings of job cuts and hiring freezes ahead of April’s minimum wage rise and National Insurance hike. But with pay growth running at 6% in December, concerns over inflation persistence mean rate setters continue to signal only gradual interest rate cuts, despite the economy hovering on the edge of recession.”

He highlighted that the Indeed Wage Tracker suggested strong pay pressures continued into January, with posted wage growth of 6.1% year-on-year.

Kennedy added: “Pay pressures are running around double the levels consistent with sustainably keeping inflation at the Bank’s 2% target, giving policymakers an ongoing headache.

“Real-time job postings data shows hiring demand remains soft but at least isn’t getting any weaker. UK job postings have broadly trodden water since October’s Budget, remaining 15% below pre-pandemic levels as of mid-February. Employers continue to sit on their hands amid uncertain economic prospects, with few having confidence to dial up hiring in the current climate.”

Kate Shoesmith, deputy chief executive of theRecruitment and Employment Confederation, said: “Many businesses are continuing to tread water. They are hiring, but at a slower pace than any of us would like. The increase in the number of payrolled employees and the small rise in the employment rate, both on the quarter and the year, demonstrates the resilience of businesses and the UK labour market.

“But employers need support if we are to see real growth and an uplift in the economy overall. That calls for investment, rather than cost-cutting. We need government to work with business on strategies that boost productivity, a strong Industrial Strategy that prioritises infrastructure investment and creates jobs, and skills development programmes that meet employer needs.

“The rise in pay is to be expected in an economy that still grapples with skills shortages in key roles, and should not unduly concern the Bank of England or impact interest rates in our opinion. It’s also important to avoid jumping to conclusions on pay at this point, as many pay rises typically happen in April at the start of a new tax year, and we have yet to see the true impact of the national insurance rises that will come into play at the same time.”

The ONS will publish its latest inflation data tomorrow (19 February).

 

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