Unemployment continues to fall

The UK labour market demonstrated signs of strengthening over the final quarter of 2021, however falling ‘real’ wages suggests that this is not being reflected in household incomes.

The latest information released by the ONS shows the unemployment rate continues to trend downward decreasing by 0.4% over to quarter to 4.1%. This is the lowest level since March 2020, the beginning of the COVID-19 pandemic. Economic inactivity has risen by 1% since the end of 2020.

Job vacancies across the UK economy remain on an upward trajectory, increasing by 11.4% over the quarter and reaching a record 1.25m in December 2021.

The largest number of vacancies were seen in the health and social care and hospitality sectors. As shown in Figure 2 below, we are seeing a slowdown in the growth of these vacancies.

With a strong labour market, it would be expected that wage growth should rise, due to the bargaining power workers have. This is proving the case, the average weekly wage continues to grow, however, the impact of inflation is negating the effect of this rise.

As shown in Figure 3, adjusting the wage data to account for RPI inflation, the ‘real’ wage growth of workers was falling over the last two months on record.

Figure 1