Europe

Workers losing whip hand in labour market, figures suggest

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Soaring wage growth is poised to come to an end with data suggesting workers may no longer hold the whip hand in the UK labour market. Year-on-year growth remains high at 6.1 percent in the UK, 6.5 percent in the US and 5.1 percent on average across six euro-area countries, figures from jobs website Indeed shows.

However, the latest UK and US figures are below their early-2022 peaks of 6.4 percent and nine percent respectively, according to Indeed.

The vast majority of job postings have seen real terms wage falls with the data appearing to show wage pressures may have peaked.

Jack Kennedy, UK Economist at Indeed, told Express.co.uk: “The heat is possibly starting to come out of the labour market.

“We’ve still got elevated levels of vacancies, but wider economic head winds; increasing uncertainty amongst businesses and employers about the state of the wider economy and expectations [the UK is] heading into a recession [are] probably starting to translate into a bit more caution in the market.”

He added: “We’ve been through a period where employers, particularly in those lower wage sectors that have been struggling to recruit staff, have really been having to increase wages quite aggressively in order to attract and retain staff.

“I think we may now be heading into a period where the most intense phase of that process is perhaps behind us and we’re heading into a softer period for the labour market.

“We’ve been through a period where workers have had a lot of opportunities to switch jobs in order to gain higher pay as well as more favourable working conditions.

“We’re perhaps entering a period now where the market isn’t going to be quite as favourable as it has been for the majority of the past 18 months where it’s been a candidate-led market with workers having the whip hand.

“It’s been very tough for employers across a number of sectors to hire staff, but we may be entering a period now where the economy is not going to be quite as strong. That balance of power may be shifting back a little more in favour of employers, though we do expect the labour market to remain relatively tight overall.”

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On slowing wage growth, he added: “That’s probably going to be a welcome signal for central banks in the sense that it doesn’t really suggest elevated risks of a wage price spiral taking hold.”

The economist explained that, despite historically strong levels of wage growth, double-digit inflation points to a continued squeeze of workers’ real terms pay.

Wage growth has been strongest in lower-paid jobs, consistent with post-pandemic labour shortages in occupations where face-to-face contact is common and in jobs which tend to pay less.

However, recent data from Indeed’s wage tracker shows lower-paid jobs have seen the biggest slowdown in wage growth in the UK and US.

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In the euro area, the picture is more mixed with pay gains still accelerating in high-wage jobs, according to Indeed.

By contrast, for low-wage jobs wage growth fell from 5.9 percent in October to 5.8 percent in November, while growth for middle-wage jobs fell from 5.1 percent to 4.8 percent, the figures show.

The slowdown is especially noteworthy in the US. At the current rate, posted wage growth in the States could return to its pre-pandemic rate of three to four percent by the second half of 2023.

On the continent, employment-weighted average wage growth in the six euro-area countries tracked by Indeed slowed for the first time in 19 months, from 5.2 percent in October to 5.1 percent in November.

The slowdown is most apparent in Ireland, Italy and the Netherlands, while France, Germany and Spain are holding fairly steady.

Wage growth in Europe also appears to be peaking at a rate well below consumer price inflation. Instead, it is tracking core inflation, which excludes food and energy.

In other words, wage increases appear to overlook fast-rising food and energy prices. This is perhaps because those shocks are viewed as temporary.

Pawel Adrjan, Director of EMEA Economic Research at Indeed, said: “Although neither our tracker nor the aggregate employment and unemployment figures suggest a significant labour market weakening in any of the countries we follow, posted wages may be significantly forward-looking.

“Their slowing growth hints that the uncertain economic outlook could be starting to weigh on labour markets, consistent with the slight decline in job vacancy rates in Europe.

“It is too early to say whether these small shifts represent a turning point for wage growth, however, they do point to the risk of wage-price spirals being limited.

“These trends could lead to a moderation of worker wage demands in 2023, even as inflation remains high.”

Indeed’s monthly report tracks year-on-year wage growth in postings across 54 job categories across seven countries in Europe (France, Germany, Ireland, Italy, The Netherlands, Spain and the UK) and the US.

To calculate average rate of wage growth, the median posted wage for each country, month, job title, region and salary type (hourly, monthly or annual) is calculated.

Within each country, year-on-year wage growth for each job title-region-salary type combination is calculated, generating a monthly distribution.

The monthly measures of wage grown for the country is the median of that distribution.

The data suggests cumulative growth in UK median posted wages from January 2019 to November this year currently stands at 16 percent.

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