Skills shortages, price growth and economic inactivity overshadow jobs data
It comes despite average earnings growing 2.6% in the year to July.
Employment and average wages have continued to grow, but concerns remain over skills shortages and workers’ ability to keep up with price inflation.
Suren Thiru, head of economics at the British Chambers of Commerce (BCC), cautioned that “robust headline data masks several areas of concern”, including earnings growth.
Average earnings rose 2.6% in the year to July, above the rate of inflation, which was last logged at 2.5%.
“While there was a welcome increase in earnings growth, the gap between pay and price growth remains insufficient to convert into an appreciable pick-up in consumer spending”, Mr Thiru said.
“Sustaining meaningful real wage growth is likely to remain challenging amid subdued productivity and the escalating burden of upfront costs on businesses.”
He also noted that job vacancies, which reached a record high of 833,000, were “alarmingly high” and pointed to further evidence of skills shortages.
“While the number of people in work stands close to historic highs, firms continue to report that attempting to recruit staff with the right skills is an increasingly uphill struggle, which is stifling their ability to grow and boost productivity.”
“It is vital that more is done to support those businesses looking to recruit and train staff, including delivering an open and flexible immigration system to help firms attract and retain the people they need to compete on the global stage.”
Howard Archer, chief economic adviser to the EY ITEM Club, also warned that the drop in the UK’s jobless figures may actually be negative for the national economy.
“Although unemployment dropped 55,000 (keeping the jobless rate at 4%), this was almost entirely accounted for by a shift of people into inactivity.”
The slowing rate of employment growth may separately be cause for concern, with the Bank of England to pause on further interest rate hikes in the near term.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Signs that employment growth is slowing should mean that the MPC (Monetary Policy Committee) does not feel compelled to dampen the recent upturn in wage growth by raising interest rates again soon.”
He said wage growth data was also linked to a recent pay rise for nearly 1.3 NHS workers , which pushed up public sector pay.
While private sector wages also grew, he said the underlying trend “still looks fairly flat”.
“Wage growth in the private sector likely will struggle to pick up further, given that the job market still has some slack and employees remain less willing than usual to move jobs.
“As a result, the MPC should be able to stick to its plans for only gradual increases in bank rate over the coming years.”