UK Regular Pay Growth Slows, Job Vacancies Decline
Pay Growth and Job Vacancies Show Signs of Weakening
Growth in British workers’ regular pay has slowed, and job vacancies have declined, indicating a loss of momentum in the labor market, according to official figures. During the three months to August, British average earnings, excluding bonuses, were 7.8% higher than a year earlier, down from 7.9% in the previous three months. The Bank of England closely monitors average earnings as it considers whether to raise interest rates to counter the risks of high inflation.
No Immediate Rate Hike Expected
The latest data from the Office for National Statistics is in line with economists’ expectations, but it has caused a slight fall in the value of sterling against the U.S. dollar. ING economist James Smith believes the data is unlikely to push the Bank of England into a rate hike at their November meeting. Private-sector regular pay, which is closely watched by the Bank of England, saw its annual growth slow to 8.0% in the three months to August, from 8.1%.
Total Pay Growth Slows as Inflation Persists
Annual growth in total pay, including one-off bonuses, slowed more than expected to 8.1% in the quarter through August, from 8.5% in the previous period. However, with consumer price inflation at 6.7% in August, the real-terms increase in pay was much smaller. Adjusted for inflation, regular pay grew by an annual 0.7% in the three months to August. While this is the biggest increase in nearly two years, it highlights how inflation has impacted the living standards of working households.
Government Aims to Tackle Inflation
Finance Minister Jeremy Hunt expressed satisfaction that inflation is falling and real wages are growing. He emphasized the government’s commitment to halving inflation to maintain progress. Prime Minister Rishi Sunak’s top goal for the year is to achieve this target, as inflation reached an 11.1% peak in October 2022.
Concerns About Economic Slowdown
Bank of England Chief Economist Huw Pill noted that fast rates of nominal pay growth contrast with other labor market measures, which indicate a slowing economy. The International Monetary Fund forecasted that Britain’s economy would only expand by 0.6% in 2024, the weakest performance among major advanced economies.
Decline in Job Vacancies and Employment
The number of job vacancies in the three months to September fell to a two-year low of 988,000, a 15th consecutive decline. Provisional employer payroll data showed a leveling-off in hiring, with 11,000 fewer people employed in September compared to August. However, it is important to note that employment figures and related labor market data will not be published until October 24.
Predictions for Wage Growth
Economist Ashley Webb suggests that wage growth has reached its peak but will only gradually decline from here. A full picture of the labor market will emerge once the delayed ONS data is published.
The article provides an overview of the slowing growth in British workers’ regular pay and declining job vacancies. While wage growth remains strong, it is losing momentum, and the Bank of England is closely monitoring the situation. The data suggests that the labor market is facing challenges, and economists predict a gradual decline in wage growth. The government aims to tackle inflation and maintain progress in real wage growth. The concerns about economic slowdown are reflected in the declining job vacancies and employment figures. It is important to await the complete labor market data to have a comprehensive understanding of the situation.
