Unemployment rises as pay growth slows again
- Published
The UK's unemployment rate has risen, official figures suggest, while pay growth continues to slow.
The rate of unemployment stood at 4.3% in the three months to September, up from 4% the previous quarter.
However, the Office for National Statistics (ONS) urged caution, external over giving too much weight to its latest jobs figures due to issues with how it gathers the data.
While wage growth has eased, pay is still rising faster than inflation, which measures the rate of price increases.
Excluding bonuses, pay grew at an annual rate of 4.8% between July and September - the lowest in more than two years.
The number of vacancies also fell again, as they have been doing for more than two years now.
Liz McKeown, director of economic statistics at the ONS, pointed out that the total still remains a little above pre-pandemic levels.
She told the BBC's Today programme that the latest figures suggested there was a "continued easing of the labour market".
But the ONS's Labour Force Survey, which produces the data on jobs in the UK, has had a smaller number of respondents over the past year than normal, prompting concerns over its reliability.
The Bank of England closely watches the jobs data when making decisions on interest rates.
It cut rates for the second time this year last week, with inflation below its 2% target at 1.7%.
Ms McKeown said the ONS recognised that issues with its numbers were affecting the central bank, and that it was working to improve it as quickly as possible.
The latest ONS figures are supported by anecdotal reports that some businesses, already facing higher costs, paused hiring ahead of the Budget.
Supermarkets including Asda and Sainsbury's and High Street giant Marks and Spencer have said they face a steep rise in costs as a result of the hike in National Insurance contributions (NICs) and increases to the minimum wage from April under measures outlined in Chancellor Rachel Reeves' first Budget.
The tax rises have led to concerns from businesses that they might have to cut back on hiring, restrict wage increases for staff, or raise prices.
While public sector pay awards granted by the government will feed through to official figures over the rest of the year, economists have warned the forthcoming rise in employers' NICs could squeeze those in the private sector.
Alexandra Hall-Chen, principal policy adviser for employment at the Institute of Directors, said that the measures in the Employment Rights Bill and tax rises were "taking a serious toll on hiring intentions".
"The cumulative effect of these changes will ultimately be to stifle job creation... [the government] needs to urgently address business' concerns about the increased risks and costs associated with employing staff," she added.
'If you want to retain staff, you need to increase pay'
Wendy Jones-Blackett, from Chapel Allerton, near Leeds, specialises in designing and making handmade greeting cards.
She told the BBC that while her small business employs seven workers, companies it sub-contracts for printing and storage would likely be more affected by the government's Budget decisions.
"The thing that we’re having to build in is that their costs are going to go up - their services and the things that we buy," she said.
"It is going to make us question pay rises – if you want to retain good staff, you want to increase their pay. We want to do that but we’ll have to temper that with rising costs."
Another survey by the Recruitment and Employment Confederation and consultancy KPMG recently showed that vacancies fell for the 12th month in a row, suggesting there is less demand for workers.
But Rob Wood, chief UK economist at Pantheon Macroeconomics, said that the Bank of England would focus on big trends rather than "small data misses" by the ONS when weighing up its next decision around interest rates.
"Unemployment is likely gradually rising, the labour market is loosening but it remains tight," he said. "Similarly, wage growth is gradually slowing but remains too high still to deliver inflation sustainably at target."
Other economists have said they do not believe the latest figures from the ONS would spur the Bank to opt for another rate cut in December.
Work and Pensions Secretary Liz Kendall said that "more needs to be done to improve living standards".
The Labour MP said that from April, three million of the lowest-paid workers would benefit from an increase to the minimum wage, known officially as the National Living Wage.
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