Key Points:
- Wage growth remains strong, but is down from peaks.
- Hiring demand has continued to cool…
- …but labour supply remains constrained amid inactivity challenges.
Our Labour Market Updates examine important trends using Indeed and other labour market data. Our recently introduced European Labour Market Overview chartbook provides a more comprehensive view of the European labour market. Other data, including the Indeed Wage Tracker, are regularly updated and can be accessed on our data portal.
The UK labour market continues to cool while still supporting strong, albeit easing, pay growth, and workers are enjoying solid real wage growth as pay rises faster than consumer prices. But policymakers at the Bank of England will want to see wage growth slowing further as they weigh possible interest rate cuts over the coming months.
Spotlight: Posted wage growth has eased, but remains high
UK posted wage growth remained strong despite easing slightly in July. Having risen to a nine-month high of 7.0% year-on-year in June, posted wage growth dipped to 6.7% in July (on the three-month average measure), its lowest since April. Meanwhile, the single-month measure fell to 6.4%, its lowest since February.
UK annual posted wage growth remains considerably above that in the euro area (3.7%) and US (3.2%). Employers are still strongly raising advertised pay for new hires in a range of categories, primarily in lower-paid occupations such as security & public safety (9.0%), retail (8.6%) and customer service (8.5%). And April’s nearly 10% minimum wage uplift — and persistent recruitment challenges in these categories — continue to support growth in advertised pay.
The latest figures from the Office for National Statistics (ONS) showed annual growth in regular pay eased to 5.4% in June, its lowest in nearly two years, though still well above the 3-3.5% range consistent with consumer price inflation at the Bank of England’s 2% target. Strong wage growth is good for workers who are seeing wages rise in real terms at an annual rate of 2.4%.
But wage growth remains sticky and uncomfortably high for rate-setters at the Bank, as they calibrate the timing and magnitude of possible cuts to their policy rate following August’s first reduction from a 16-year high (from 5.25% to 5%).
Labour market remains somewhat tight
The latest ONS figures showed a further drop in vacancies, alongside a surprise dip in the unemployment rate to 4.2%. However, the labour force survey on which the latter is based continues to be afflicted by data quality issues, meaning policymakers are likely to place relatively little weight on the latest movement as a guide to underlying labour market strength.
The ratio of unemployed people to vacancies currently stands at 1.6, up from its low of 1.0 back in 2022, and about where it was prior to the pandemic, when the labour market was generally considered to be fairly tight. Inactivity continues to be a challenge, with the number of working-age people not participating in the labour market standing at a near-record high.
Job postings have cooled further
The latest Indeed data shows that hiring demand has continued to cool. After peaking at almost 70% above pre-pandemic levels in early 2022, UK job postings on Indeed gradually retreated. In late May 2024, postings fell below their pre-pandemic baseline. As of 16 August, postings stood 5.7% below their 1 February 2020 baseline.
Recent UK economic performance has been solid, with growth in the first half of the year coming in at a decent clip. The Bank of England cut interest rates in August and is expected to ease further over coming months. However, the timing and extent of any further rate cuts hinges on evidence that inflation persistence in certain pockets of the economy — including service sector prices and wage growth — are continuing to ease. Further rate cuts would support growth and potentially embolden employers to boost hiring demand.
Conclusion
Despite a cooling in hiring demand and easing wage growth, the UK labour market remains tight, supporting robust pay increases. As the Bank of England considers further rate cuts, policymakers will closely monitor wage trends to gauge inflationary pressures and the potential for renewed economic growth.
Hiring Lab Data
Job postings data is available on our Data Portal. We also host the underlying job-postings chart data on Github as downloadable CSV files. Typically, it will be updated with the latest data one day after this blog post is published.
Methodology
Data on seasonally adjusted Indeed job postings are an index of the number of seasonally adjusted job postings on a given day, using a seven-day trailing average. Feb. 1, 2020, is our pre-pandemic baseline, so the index is set to 100 on that day. We seasonally adjust each series based on historical patterns in 2017, 2018, and 2019. We adopted this methodology in January 2021. Data for several dates in 2021 and 2022 are missing and were interpolated. Non-seasonally adjusted data are calculated in a similar manner, except that the data are not adjusted to historical patterns. Note that we have recently restated the historical JPI data for several countries, including the UK, due to a methodology change.
To calculate the average rate of wage growth, we follow an approach similar to the Atlanta Fed US Wage Growth Tracker, but we track jobs, not individuals. We begin by calculating the median posted wage for each country, month, job title, region and salary type (hourly, monthly or annual). Within each country, we then calculate year-on-year wage growth for each job title-region-salary type combination, generating a monthly distribution. Our monthly measure of wage growth for the country is the median of that distribution.
The number of job postings on Indeed.com, whether related to paid or unpaid job solicitations, is not indicative of potential revenue or earnings of Indeed, which comprises a significant percentage of the HR Technology segment of its parent company, Recruit Holdings Co., Ltd. Job posting numbers are provided for information purposes only and should not be viewed as an indicator of performance of Indeed or Recruit. Please refer to the Recruit Holdings investor relations website and regulatory filings in Japan for more detailed information on revenue generation by Recruit’s HR Technology segment.
