IoD has concerns over rate at which real earnings are falling

The business organisation’s lead on economics, Richard Hemans, was commenting on the recently-released Guernsey Quarterly Population, Employment and Earnings Bulletin.

Both quarters of 2022 have so far shown a decrease in average real earnings, with a drop of 1.4% in the first quarter and a further 2.8% drop in the second quarter.

That puts real earnings at £37,387 at halfway through the year.

‘The biggest concern in the bulletin is the acceleration in the decline of real earnings, which fell by 2.8% over the last 12 months compared with 1.4% in the previous quarter, as inflation grew faster than wages,’ Mr Hemans said.

‘Consumer spending will inevitably weaken as consumers face the dual headwinds of higher interest rates and inflation, along with uncertainty about the future tax burden as the States reviews the tax system.

‘This will have significant implications for discretionary industries such as retail, entertainment and hostelry, as well as the local housing market and the wider economy.’

However the report was not all bad news.

Guernsey’s population has been growing for almost every quarter since 2018, with 63,823 people here at the end of 2021, compared with 62,472 at the end of 2018.

‘Last year the island experienced the fastest population growth since before 2018, with the number of people living here growing by 539 or 0.9%,’ Mr Hemans said.

‘This shows that the island remains an attractive place to live and work, and that our economy and labour markets are robust.

‘Indeed, the population growth the island has enjoyed over the last four years would exceed the recent target of plus 300 net migration recently approved by the States,’ he said.

‘Migration remains the only engine of population growth given the ongoing natural decrease in the population. Births have been declining since 2011, whilst the number of deaths during that period have been fairly stable.

‘The birth rate is therefore falling and must also be considered by the States as part of the long-term solution to growing the island’s workforce and population.’

Guernsey’s unemployment levels are at their lowest level since 2017, with 580 registered unemployed at the end of September.

Employment dropped during the pandemic, but has been recovering slowly over the last year.

‘It is noticeable that although employment has fallen since the pandemic, self-employment has risen and that could be one of the consequences of the pandemic as people look for more flexibility,’ said Mr Hemans.

‘The construction and hostelry sectors are employing more workers, as they benefit from the strong economy and the post-pandemic recovery, whilst finance, retail and public administration are employing fewer workers.

‘Employment vacancies are declining, which suggest that the labour market may be starting to soften.’