Unrelenting Decline in Hiring Activities Persists
In the realm of Macro-Economic Modelling and Forecasting, the UK economy is currently experiencing a significant shift in its labour market. This article, authored by Monica George Michail, delves into the current trends of wage growth, business hiring, and unemployment.
Over the past three years, business hiring has been on a steady decline, a trend that shows no signs of abating soon. This downturn can be attributed to a variety of factors, including higher labour costs due to tax rises and the minimum wage hike, overall economic uncertainty, and recent visa restrictions that have made it more expensive to hire overseas candidates.
Despite these challenges, the services sector has managed to maintain a robust wage growth of 5%. However, this strong pay growth remains a source of uncertainty for the Bank of England's interest rate cut decisions. According to predictions, wage growth is expected to continue falling and approach 4% towards the end of the year. This forecast was made by Michael Saunders, a member of the Bank of England's Monetary Policy Committee, who stated, "Given these developments, we expect wage growth to continue falling, and to approach 4% towards the end of the year."
In contrast, the annual growth in real regular pay stands at a modest 0.9%. Yet, there is a silver lining in the form of an increasing supply of labour. This increase is due to a decline in inactivity and rising unemployment, which could potentially stimulate economic activity in the future.
As for total earnings (including bonuses), the Annual wage growth stands at 4.6%, as per the Office for National Statistics (ONS) figures for the three months to June 2025.
Access to this content is restricted to corporate members, NiGEM subscribers, and NIESR partners. As we navigate through these economic changes, it's crucial to stay informed and understand the dynamics at play in the UK labour market.
