Real pay is creeping up at its fastest rate for two years but economic activity is slowing while the jobless rate climbs.

This morning's mixed findings from the Office for National Statistics show how unemployment jumped by 166,000 in Q4 of 2023 and the Q1 2024, with the graph nudging up from 3.8% to 4.3%. 

Over the same time span, the number of jobs available fell by 26,000 to 898,000, with the overall number of those in employment falling by 178,000.

Liz McKeown, ONS director of economic statistics, said: "We continue to see tentative signs that the jobs market is cooling, with both employment from our household survey and the number of workers on payroll showing falls in the latest periods."

At the same time though, a steady decline in the number of job vacancies has continued for a 22nd consecutive month, although numbers remain above pre-pandemic levels.

She added: "With unemployment also increasing, the number of unemployed people per vacancy has continued to rise, approaching levels seen before the onset of Covid-19. Earnings growth in cash terms remains high, with the recent falls in the rate now levelling off while, with inflation falling, real pay growth remains at its highest level in well over two years."

Amid these figures, the Times newspaper reports that the "Great Resignation" that was triggered in the wake of the Pandemic is now giving way to the "Big Stay", with jittery employees holding onto their desks as they eye uncertain economic forecasts.

In its new Labour Market Outlook, the Chartered Institute for Personnel and Development, which is the industry body for HR, said the bigger picture shows how, despite the labour market reverting to somewhat of a post-COVID normality, there continues to be a high level of vacancies by historic standards.

But James Cockett, the CIPD's labour market economist, said that with nominal pay growth remaining at 6%, today's figures signal change is coming.

Mr Cockett said: "Today's figures highlight an increasing disconnect between continued strong wage growth and the loosening labour market. This is characterised by slowly rising unemployment and falling vacancies, against a backdrop of weakening inflation."

These factors suggest the power in the labour market is gradually shifting from workers to employers, he added, and this may start to feed into lower pay growth over coming months.

The CIPD expects the level of vacancies to continue to fall beyond today's figures from the ONS which show that the UK employment rate for January to March 2024 remained below estimates of a year ago and decreased in the latest quarter.

The ONS findings highlight how the UK unemployment rate for Q1 2024 (4.3%) is above estimates of a year ago, and increased in the latest quarter. Similarly, the economic inactivity rate for Q1 2024, at 22.1%, is above estimates of a year ago and also increased in the latest quarter.

A spokesperson added: "The unemployment rate had generally been falling from late 2013 until the start of the coronavirus (COVID-19) pandemic. It increased until the end of 2020, but had decreased to below pre-coronavirus rates by mid-2022. Thereafter it increased in the first half of 2023, but decreased in the second half. In the latest quarter, the rate increased.

Against these mixed messages, uncertainty remains on any prediction for the Bank of England's next interest rate decision – but the Federation of Federation of Small Businesses is making a vocal case for a cut.

In the wake of the last decision to hold firm, the FSB warned "there is only so long small firms can wait".

Martin McTague, National Chair added: "While widely predicted, [the latest] decision by the Monetary Policy Committee to keep the base rate at 5.25% rather than opting for a cut will be seen by many small firms as a missed opportunity."

He warned: "Small firms' confidence is returning - in part because they are anticipating rate cuts this year. There is only so long they can wait, which is something we would urge the Bank of England to bear in mind."

And from the perspective of bigger business, the Confederation of British Industry sounded additional concern that any perceived cooling of the labour market might mask the issue of rising pay.

Matthew Percival, Director of Future of Work, CBI, said: "While there continue to be signs of the labour market cooling, it is still overheating, and there is not yet any indication that pay rises are reducing to a level compatible with easing inflation and reducing interest rates."