Labour market indicators

Historically high earnings growth continues and may be helping to tempt some people back into work.

Over the year to May, regular pay — Average Weekly Earnings (AWE) excluding bonus payments — rose by 7.1%, averaging 7.3% over the three months from March to May.

Apart from an equivalent peak in June 2021 (as earnings recovered after lock-down and furlough) these were the highest increases since AWE records began in January 2001. For comparison, over that entire period the average annual increase was 3.1%.

However, high inflation is still causing real pay growth rates to fall.

Whether it’s because of shrinking real pay or higher nominal pay rates, the economic inactivity rate decreased by 0.4 percentage points on the quarter, to 20.8% (March to May 2023).

According to the Office for National Statistics, this was driven by people who were looking after family or home or were retired.

There were corresponding increases in the employment rate (up by by 0.2 points to 76.0%) and the number of people actively looking for work (the unemployment rate increased to by 0.2 points to 4.0%).

At the same time, vacancies fell by 85,000 to 1,034,000. But that is still a very big number and reflects acute skill shortages.