# UK’s hot labour market cools and inflation eats pay
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2022-08-16
Category: NEWS
Category URL: https://financedigest.com/category/news
Meta Title: UK labour market shows signs of cooling as wages fall -
Meta Description: Explore the latest official data showing a cooling in Britain's labour market, with stable unemployment rate but record fall in wages adjusted for
URL: https://financedigest.com/uks-hot-labour-market-cools-and-inflation-eats-payhtml

![undefined](https://prod.superblogcdn.com/site_cuid_cm5qst7v3003gwirgwqtxn8i8/images/2022-08-16t074514z3lynxmpei7f04vrtroptp4health-coronavirus-britain-economy-1736815463074-compressed.jpg)

By William Schomberg and David Milliken

LONDON (Reuters) -Britain’s super-hot labour market showed signs of cooling in official data published on Tuesday, as businesses became more cautious about hiring and workers suffered a record fall in their basic wages when adjusted for soaring inflation.

The unemployment rate of 3.8% in the three months to June was unchanged from last month’s report, close to a half-century low despite Bank of England warnings that the economy is likely to slip into recession later this year.

The number of people in work grew by 160,000 in the April-June period compared with the quarter before, but this was a lot less than expected in a [Reuters poll](https://www.financedigest.com/bank-of-england-to-raise-rates-by-50bps-again-to-tame-inflation-reuters-poll.html "Bank of England to raise rates by 50bps again to tame inflation: Reuters Poll") of economists, which had pointed to an increase of 256,000.

The number of unemployed people rose slightly, pushed up by people [returning to the labour market](https://www.financedigest.com/prague-christmas-market-returns-after-covid-but-with-fewer-lights.html "Prague Christmas market returns after COVID but with fewer lights") to look for jobs.

[Job vacancies in the three months to July fell for the first time](https://www.financedigest.com/britains-purplebricks-to-cut-more-than-10-of-jobs-the-times.html "Britain’s Purplebricks to cut more than 10% of jobs – The Times") since mid-2020 but stayed close to a record high at 1.274 million.

Jake Finney, an economist at accountancy firm PwC, said he expected the continued shortage of workers available to fill vacancies would keep a lid on the [jobless rate](https://www.financedigest.com/italy-jan-jobless-rate-edges-up-to-7-9-with-35000-jobs-created.html "Italy Jan jobless rate edges up to 7.9%, with 35,000 jobs created").

Though hiring efforts are slowing, we expect the [unemployment rate](https://www.financedigest.com/spains-unemployment-rate-inches-up-to-12-87-in-q4-2022.html "Spain’s unemployment rate inches up to 12.87% in Q4 2022") to remain relatively stable for the rest of this year,” he said. In the [face of labour shortages](https://www.financedigest.com/britain-facing-tomatoes-shortage-after-overseas-harvests-disrupted.html "Britain facing tomatoes shortage after overseas harvests disrupted"), UK firms are more likely to hoard than shed labour.

The BoE expects the jobless [rate will only start to rise](https://www.financedigest.com/uk-inflation-rate-unexpectedly-rises-to-10-4-in-february.html "UK inflation rate unexpectedly rises to 10.4% in February") from mid-2023 before increasing to 6.3% in three years’ time.

The central [bank raised](https://www.financedigest.com/bank-of-england-raises-rates-to-3-5-says-inflation-has-peaked.html "Bank of England raises rates to 3.5%, says inflation has peaked") borrowing costs by the most since 1995 earlier this month and said it remained ready to act forcefully if that pressure became more persistent.

Britain’s labour market emerged from the coronavirus pandemic with unemployment at its lowest [levels since 1974 due in large part to a shortage of domestic and foreign](https://www.financedigest.com/foreign-tourism-to-portugal-surpasses-pre-covid-levels-in-july.html "Foreign tourism to Portugal surpasses pre-COVID levels in July") workers.

In response, [employers have increased their pay](https://www.financedigest.com/uk-employers-see-slight-fall-in-pay-awards-over-2023-xperthr.html "UK employers see slight fall in pay awards over 2023 – XpertHR") to attract and retain staff.

The ONS data showed wages excluding bonuses in the [second quarter were 4.7% higher than a year](https://www.financedigest.com/ericssons-board-rebuked-by-shareholders-at-agm-for-second-year-in-a-row.html "Ericsson’s board rebuked by shareholders at AGM for second year in a row") earlier, picking up pace from the three months to May and potentially adding to concerns at the BoE.

But despite the acceleration in core pay, workers are increasingly feeling the [hit from the surge in inflation](https://www.financedigest.com/uk-shop-price-inflation-hits-record-8-in-january-brc.html "UK shop price inflation hits record 8% in January: BRC").

Earnings adjusted for the consumer prices index fell by 4.1%, the [biggest drop since](https://www.financedigest.com/uk-firms-plan-biggest-pay-rises-since-2012-to-fill-staff-gaps.html "UK firms plan biggest pay rises since 2012 to fill staff gaps") records began in 2001.

The scale of this [pay pain is even deeper than official figures suggest too, as pay growth](https://www.financedigest.com/uk-recruiters-slow-pace-of-pay-growth-in-march-rec-survey-shows.html "UK recruiters slow pace of pay growth in March, REC survey shows") estimates are still artificially boosted by the effects of the furlough scheme last year,” Nye Cominetti, a senior economist at the Resolution Foundation think tank, said.

Figures due to published on Wednesday are expected to show consumer prices rose by 9.8% in the 12 months to July, according to economists polled by Reuters, and the BoE [expects it to hit](https://www.financedigest.com/uks-dominos-expects-tech-investments-to-hit-2023-profit.html "UK’s Domino’s expects tech investments to hit 2023 profit") 13.3% in October, its highest since 1980.

(Reporting by William Schomberg Editing by David Milliken and Raissa Kasolowsky)


---
This blog is powered by Superblog. Visit https://superblog.ai to know more.
---