This year is set to see real pay finally surpass its 2008 peak, but employment is at risk of falling from the record level it enjoyed throughout 2019, according to the latest Earnings Outlook published by independent think tank the Resolution Foundation.
Highlighting three key warning signs, the Outlook (available at https://www.resolutionfoundation.org/app/uploads/2019/12/Earnings-Outlook-Q3-2019.pdf) warns that much of the economic data points to a weakening in the jobs market in 2020.
Pointing to what it calls “wary firms and worried workers”, the report points out that more than twice as many people expect unemployment to rise next year as did so back in 2017.
Second, the number of vacancies (often a leading indicator for employment) has, while still high, been falling consistently for the past 10 months.
Finally, employment among 18 to 24 year-olds began falling in 2019 and their volatile employment rates tend to follow the economic cycle more than most other groups.
The Foundation’s Chief Executive, Torsten Bell, said: “2019 was a bad year for the economy, which looks set to have recorded its weakest GDP growth outside of recessions since the war. However, the part of the economy that households really care about — the labour market — defied the economic gloom and delivered record employment and decent pay growth.”
The crucial living standards question facing employers and workers in the year ahead is whether the labour market can continue its bullish run.
The fact that the economy is growing slowly because businesses are not investing received “next to zero discussion” during the election campaign, Mr Bell argues, but it must now be put centre stage.
While 2020 will see the UK’s unprecedented 11-year pay downturn come to an end, the longer-term prospects for pay risk being held back by the continuing absence of productivity growth, he goes on.
The Outlook notes that, while the proportion of people receiving “off-the-job” training was slightly up over the past year at 6.8%, the long-term trend still shows a big fall in training intensity over the past 20 years.
It also highlights that labour productivity has not grown over the past year, having only risen 1.2% over the past four years.
Comment by Andy Willis, Head of Legal at Croner
It is well documented that the uncertainty around Brexit has affected hiring confidence across the UK. However, with a solution finally on the horizon, there is reason to hope for an upturn in recruitment in 2020.
Many employers may understandably hold reservations about investing a significant amount of financial resources in light of such a gloomy economic forecast.
After all, employers should protect the financial interests of their business, meaning it may still prove more cost-effective to train existing employees to take on multiple roles to keep staffing numbers and payroll costs down.
Last reviewed 13 January 2020