Amidst the UK’s economic downturn, worker confidence is unexpectedly high.
- The latest Jobs Confidence Index (JCI) shows near record-high confidence among UK employees.
- Despite a shallow recession, 56.1% of workers feel secure about their jobs.
- Real earnings have increased for the third consecutive quarter, fuelling wage demands.
- Labour market tightness is exacerbated by skills shortages and economic inactivity.
The UK labour market is displaying an unusual confidence despite the country’s recessionary backdrop. According to the Robert Half Jobs Confidence Index (JCI), produced in conjunction with the Centre for Economics and Business Research, employee confidence remains robust. The JCI has revealed that while the UK encountered a shallow recession in Q4 2023, a substantial 56.1% of employees expressed confidence in their job security over the next six months. This optimism has driven job confidence to near record highs, a trend uncharacteristic for economic downturns.
The job security metric within the JCI has reached its second highest level ever recorded. Currently standing at 138.4, this index level is supported by an unemployment rate at a historical low of 3.8%. Such figures signal a persistently tight labour market, primarily influenced by ongoing skills shortages and higher-than-normal job vacancies remaining unmet since pre-pandemic times.
Real earnings in the UK have increased consecutively for three quarters due to a decline in headline inflation rates. The pay confidence index witnessed a significant gain, climbing 8.3 points to a reading of 36.8. This elevation in pay confidence is anticipated to spur further wage demands as worker expectations rise in response to improved economic circumstances and increased earning potential.
The rate of input price inflation has recorded its highest figure since August 2023, largely attributed to rising wages, particularly within the service sector. Such wage-driven inflation presents challenges, especially concerning the anticipation of interest rate cuts. “Be under no illusion that workers are feeling confident regarding their job security and ability to command better pay, despite the gloomy economic news,” commented Matt Weston, Senior Managing Director UK & Ireland at Robert Half.
Despite the promising signs of an economic recovery, the persistent skills shortages and economic inactivity complicate the labour market’s dynamics. The number of vacancies in the UK stands at approximately 900,000, hampered by sluggish economic activity levels not seen since before the pandemic. The revival of the economy is indeed welcomed; however, the entrenched skills gaps and economic inactivity will continue to constrain growth, maintaining upward pressure on wages.
The UK labour market’s resilience amidst recession highlights workers’ confidence and reveals underlying challenges in the economy.
