The UK job market is witnessing a notable decline in vacancies, with figures showing a decrease from previous quarters. From June to August 2024, job vacancies fell by 42,000, totaling 857,000, a significant drop of 143,000 compared to the same period last year. However, vacancies remain 61,000 higher than pre-COVID-19 levels. Meanwhile, wage growth continues to outpace inflation, potentially affecting state pensions as the government adheres to the triple lock policy.
The number of workers on company payrolls also saw a reduction. A revised estimate for July shows a decrease of 6,000 from June. Despite these figures, wages excluding bonuses grew by 5.1% in July, surpassing the UK's current inflation rate of 2.2%, though this marks a slight decline from the 5.4% growth observed in the previous three months.
The implications of wage growth extend beyond immediate economic considerations. The latest figures suggest that the full UK state pension could rise by approximately £460 annually starting April 2025. A projected 4% increase would elevate the full basic state pension to £176.30 weekly, or £9,167 annually, representing a rise of £353.60. This adjustment would bring the full new state pension to £230.05 weekly, or £11,962.60 annually.
For individuals born before the specified dates, which accounts for nearly three-quarters of the approximately 12.7 million state pensioners, the full basic state pension currently stands at £169.50 weekly. For those born after these dates, the full state pension is £221.20 weekly.
The Office for National Statistics (ONS) reported that average earnings, including bonuses over the three months to July, grew by 4%. These figures are crucial as they are utilized to calculate the pensions triple lock. The annual inflation rate for September, soon to be released by the ONS, will further influence this calculation.
Chancellor's commitment to maintaining the state pension triple lock remains steadfast despite financial pressures and the need for budgetary savings.
"More money in pensioners’ pockets each and every year, and it will mean the full new state pension will be worth around £1,700 more in 2029," said the chancellor.
As unemployment rates dipped slightly to 4.1% from 4.2%, analysts note this as a sign of cooling labor market conditions. Monica George Michail commented on the services sector pay growth, which has fallen faster than expected.
"Services sector pay growth has fallen faster than expected, recording 3.8%, compared to an average of 5.9% in the first five months of this year," she stated.
While this downturn in wage growth is perceived positively in relation to inflation and interest rate adjustments, experts remain cautious regarding immediate changes to monetary policy.
"This is positive news for inflation and might provide the Bank of England with increased confidence regarding interest rate cuts," Michail added.
However, Ashley Webb expressed skepticism regarding imminent interest rate cuts despite the easing wage growth.
"The further easing in wage growth will be welcomed as a sign that labor market conditions are continuing to cool. But we doubt this will be enough to prompt a back-to-back 0.25 percentage point interest rate cut, from 5% to 4.75%, in September," Webb noted.
Market projections suggest that the next rate cut by the Bank of England is anticipated in November. Meanwhile, Rachel Reeves highlighted the UK's financial challenges.
"To repair the £22bn black hole in the public finances that we inherited from the previous government," she remarked.