Latest figures on wages and employment ‘do not reflect Brexit uncertainty’

Employment and wage growth up, but ‘crisis’ could hit labour market in the new year, say economists

Wages and employment have both risen over the final quarter of the year, new data has revealed – but experts warned ongoing uncertainty over Brexit could increase pressure on the labour market in 2019. 

According to the latest figures from the Office of National Statistics (ONS), wages increased by 3.3 per cent between July and September 2018, marking the biggest rise since November 2008.

This places the average UK weekly wage at £495, the highest it has stood at since 2011.

The figures also show employment rose over the same three months, with 32.48m people in work, an increase of 79,000 on the same period a year earlier.

As more women and older workers enter the workforce, unemployment has fallen to its lowest point since 1976, with economic inactivity currently at 21 per cent.

While the figures may bring “seasonal cheer” to the labour market, Tony Wilson, director of the Institute for Employment Studies (IES), warned there were still reasons to be cautious.

“[The] figures cover the period from July to September, and so do not pick up the political and economic turbulence of the last few months,” he said, indicating it was a sign that the “crippling uncertainty” over Brexit was yet to feed through to the jobs market. 

Recently published research from the Organisation for Economic Co-operation and Development (OECD) has also suggested the UK’s productivity gap compared to other developed countries may be narrower than previously assumed, due to a difference in the way working hours are measured. 

However, Ian Brinkley, chief economist at the CIPD, stressed that while wage growth and the associated rise in real earnings were positive, employers would have to continue thinking longer term if they hoped to see the uptick extend into the coming year. 

“Historically, real wage growth and productivity growth have gone hand-in-hand, but it remains to be seen if rising real wages will also be reflected in better productivity figures in the months ahead, given the current Brexit crisis,” he said. 

“It’s vital that employers look at how they can invest in skills and adopt the right people management practices to boost productivity in their organisation and the UK overall.”

Tom Hadley, director of policy at the Recruitment and Employment Confederation (REC), warned his organisation’s research suggested employer confidence was less robust than the ONS figures projected, with ongoing struggles with Brexit likely to have an impact. 

“Even before the latest turbulence, REC data showed employer confidence in the economy declining month-on-month,” he said. 

“Businesses need clarity regarding Brexit and a pragmatic approach to future immigration policy to deal with labour shortages. Employers are looking for reassurances from the government over our future relationship with Europe, but instead they are facing more uncertainty by the day.”

Recent reports have shown employers covering the costs of their EU staff’s settled status applications in a bid to provide stability, but a government policy paper last week suggested workers would face increasingly stringent regulations in the event of a no-deal Brexit. 

“While the labour market has seen some growth in employment, and a very slight rise in unemployment, it is getting steadily tighter. This implies that labour and skill shortages will increase and recruitment and retention may become more challenging,” Brinkley warned. 

“However, these pressures stand to significantly increase if the current uncertainty over Brexit deters more migrants from coming to the UK and net migration from the EU continues to fall.”