What Can We Learn From the New Labour Force Survey Figures?

Main points

• Pay growth remains strong: The annual growth rate of average weekly earnings, including bonuses, was 5.8 per cent in the fourth quarter of 2023 while pay growth excluding bonuses was 6.2 per cent. These figures indicate that wage growth continued to soften towards the end of 2023, after peaking over summer (Figure 1).
• We forecast wage growth to slow as the labour market continues to cool: we forecast economy-wide total pay (incl. bonuses) and regular pay to grow by 5.8 and 6.1 per cent in the first quarter of 2024, respectively.
• Labour Force Survey data was reintroduced today: On 5 February, the ONS released newly reweighted LFS estimates to better reflect the latest estimates of the size and composition of the UK population, and improve the post-pandemic data adjustments. Today marks the first data release since October 2023 in which these data have been updated. The latest LFS data indicate that in the year to the fourth quarter of 2023, the employment rate fell by 1.2 percentage points to 75.0 per cent, the unemployment rate fell by 0.2 percentage points to 3.8 per cent, and the inactivity rate increased by 1.4 percentage points to 21.9 per cent.

“Today’s ONS figures indicate that the annual growth rate in average weekly earnings, including bonuses, was 5.8 per cent in the fourth quarter of 2023, and 6.2 per cent excluding bonuses. While these figures remain high by historical standards, they indicate that wage growth softened towards the end of the year, after peaking over summer. Today’s data release also sees the reintroduction of Labour Force Survey data for the first time since October 2023, which indicate that in the year to the fourth quarter of 2023, the employment rate fell by 1.2 percentage points to 75.0 per cent, the unemployment rate fell by 0.2 percentage points to 3.8 per cent, and the inactivity rate increased by 1.4 percentage points to 21.9 per cent. Concerningly, the latter was driven by an increase in the number of people out of work because they are long-term sick, which has reached record levels. With vacancies falling steadily for the 19th consecutive period, the vacancy-to-unemployment ratio was 0.71 in the fourth quarter of 2023, representing a 0.16 percentage points fall on the year, and indicating that the labour market has loosened in this time. If this trend continues, wage growth is likely to gradually return to historical levels in the medium-term.”

Paula Bejarano Carbo

Economist, NIESR