Wages in the UK are rising faster than inflation
According to official figures, wages in the UK rose faster than inflation in the three months to September.
The Office for National Statistics (ONS) reported that average wages excluding bonuses were 7.7 percent higher in the three months to September than a year earlier.
This means that real wages, taking inflation into account, rose by 1%. This is the largest increase in two years.
Chancellor of the Exchequer Jeremy Hunt said: “It is encouraging to see inflation falling and real wages rising, leaving more money in people’s pockets.”
Total salaries, which also include bonuses, rose by 7.9 percent, due to one-off bonus payments to civil servants this summer. Adjusted for the current inflation rate of 6.7 percent, total salaries rose by 1.2 percent.
Read more: Despite falling inflation, UK business confidence will fall to lowest level in 2023
It’s the highest rate of real wage growth in two years, according to the ONS, but the pace is slowing. Economists believe this could prompt the Bank of England to cut interest rates sooner than expected.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: “Significantly slower wage growth increases the likelihood of a rate cut in the first half of 2024.”
He added: “Monthly growth in average weekly earnings excluding bonuses slowed to 0.24% in September – or 2.9% on an annual basis – well below the average increase of 0.64% in the first eight months of 2023.”
“Given trend productivity growth of almost 1%, the pace in September is broadly in line with the 2% inflation target.
Interest rate sitters see high wage growth as a threat to inflation, so any sign of easing increases the likelihood of a rate cut. Interest rates have currently peaked at 5.25%, and the risk of a recession is high.
Huw Pill, chief economist at the Bank of England, said that while labour market data showed a moderation in wage growth, it was still too high to be consistent with the central bank’s inflation target of two per cent.
“We got the latest official data on wage growth in the UK this morning, which shows wage growth of 7.7%. And that’s a little off,” Pill said at a discussion on central banks at the Bristol Festival of Economics 2023.
The unemployment rate in the UK remained unchanged at 4.2% in the three months to September.
In the three months to October, the number of job vacancies fell, a sign that the economy was weakening.
The estimated number of job openings during this period was 957,000, a decrease of 58,000 compared to May-July. It was the 16th consecutive period in which the number of job openings declined.
Attention: The pace of wage increases is slowing, but the unemployment rate remains unchanged
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