The Resolution Foundation’s Earnings Outlook believes 2020 will be a “turning point” for real wages, but employment could fall.
In the Earnings Outlook, it was noted that last year was a good one for the UK labour market; even though the latest figures from the Office for National Statistics (ONS) point to a weak end of the year for the UK’s economy – with growth of just 0.1% registered in the three months to November – record levels of employment were recorded, along with the strongest nominal pay growth in more than a decade, which peaked at 3.9% in June.
This despite what looks to be the weakest year of GDP growth outside of recessions since World War Two.
However, the Earnings Outlook has sounded a warning for the jobs market this year, with economic data pointing to a weakening of this in 2020.
There are three key warning signs: wary firms and worried workers, given that employment intentions of businesses went negative last year; declining vacancies – revealing the number of vacancies, although still high, fell consistently in the last 10 months of the year; youth job decreases – in 2019, employment among 18-24 year olds suffered a worrying decline.
The Foundation’s analysis has brought together key economic data in a statistical model, and the picture it paints is one that suggests the current weak GDP growth is consistent with falling employment in 2020.
For pay, the Foundation said it will be a “symbolic year” for the post-crisis economic history, with pay packets set to surpass their April 2008 peak early in 2020, bringing to a close the unprecedented 11-year pay downturn.
A retreat from the record employment levels is more likely than record pay, though expectations could be defied – something that would be more likely if business investment and productivity improved.
The Foundation believe that these two targets should be the key focus for policy makers.