GROWTH in British workers’ regular pay – which is being watched closely by the Bank of England – slowed from a previous record high and job vacancies also declined, official figures showed on Tuesday (17), in a sign that the labour market is losing momentum.
British average earnings, excluding bonuses, were 7.8 per cent higher than a year earlier during the three months to August, down from an upwardly revised 7.9 per cent in the three months to July, the first such fall since January.
Average earnings are being monitored by the Bank of England as it considers whether to resume raising interest rates to counter the risks from still-high inflation. Private-sector regular pay – the component looked at most closely by the BoE – saw annual growth slow to eight per cent in the three months to August, from 8.1 per cent.
Annual growth in total pay – a more volatile measure which includes one-off bonuses – slowed more than expected to 8.1 per cent in the quarter through August, from an unrevised 8.5 per cent in the May to July period.
However, with consumer price inflation of 6.7 per cent in August, the real-terms increase in pay was far smaller.
Regular pay, adjusted for CPI inflation, grew by an annual 0.7 per cent in the three months to August. Even so, this was still the biggest increase in nearly two years, highlighting how inflation has squeezed working households’ living standards.
“It’s good news that inflation is falling and real wages are growing,” chancellor Jeremy Hunt said after the data.
“To keep this progress, we must stick to our plan to halve inflation,” he said.
Prime minister Rishi Sunak said at the start of the year that his top goal was to halve inflation, which peaked at a 41-year high of 11.1 per cent in October 2022.
Bank of England chief economist Huw Pill said on Monday (16) that fast rates of nominal pay growth stood at odds with most other labour market measures, which have pointed to a slowing economy.
Last week, the International Monetary Fund forecast Britain’s economy would expand just 0.6 per cent in 2024, the weakest of any major advanced economy.
The number of job vacancies in the three months to September fell to a two-year low of 988,000, Tuesday’s data showed.
Vacancies are down by more than a quarter of a million over the past year, although they are still almost 25 per cent higher than before the pandemic.
Provisional employer payroll data showed there were 11,000 fewer people in employment in September compared with August - representing a levelling-off in hiring after employer payrolls swelled by more than one million since the start of the pandemic.
Unemployment figures and other related labour market data will not be published until October 24, after the ONS said last Friday (13) it needed more time to take account of low response rates.
Ashley Webb, an economist with consultancy Capital Economics, said a 15th consecutive fall in job vacancies suggested the tightness of the labour market had eased a bit further although a full picture would emerge only when the delayed ONS data is published.
“Either way, wage growth has passed its peak. But we suspect it will fall only gradually from here,” Webb said. (Reuters)
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