UK wages grow faster than inflation
UK wages grew at a faster pace than inflation in the three months to September, according to official figures.
The Office for National Statistics (ONS) reported that average wages excluding bonuses were 7.7% higher than a year earlier in the three months to September.
It means that pay grew in real terms by 1% after taking inflation into account, rising at its fastest rate for two years.
Chancellor Jeremy Hunt said: “It’s heartening to see inflation falling and real wages growing, keeping more money in people’s pockets.”
Total pay, which includes bonuses, rose by 7.9%, bolstered by one-off bonus payments to civil service staff this summer. Adjusted for the current inflation level of 6.7%, total pay rose by 1.2%.
Read more: UK business confidence falls to lowest in 2023 despite easing inflation
The ONS said it was the highest rate for real wage growth for two years but the pace is slowing. Economists believe this could lead the Bank of England to cut interest rates earlier than expected.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said: "Much slower wage growth is increasing the chances of a rate cut in H1 (first half) 2024."
He added: "Month-to-month growth in average weekly earnings excluding bonuses slowed to 0.24% in September — or 2.9% on an annualised basis — well below the 0.64% average increase in the first eight months of 2023.
"September's pace is broadly consistent with the 2% inflation target, given trend productivity growth of almost 1%.
Rate-setters see high pay growth as an inflationary threat so any signs of easing will raise chances of a rate cut. Rates are now widely seen as having peaked at 5.25% and with the threat of recession looming large.
The number of vacancies in August to October 2023 was 957,000, down 58,000 on the previous three months.
They were down by 257,000 from a year ago, although they remained 156,000 above their pre #COVID19 levels.
📷 https://t.co/r836CNA3ur pic.twitter.com/rhVixrGwdo— Office for National Statistics (ONS) (@ONS) November 14, 2023
Bank of England chief economist Huw Pill said labour market data showed a weakening of pay growth but was still too high to be consistent with the central bank's 2% inflation target.
"We did have this morning the latest official data on pay growth in the UK with pay growing at 7.7%. And that's a little bit off where it was," Pill said at a discussion about central banks at the Bristol Festival of Economics 2023.
The rate of UK unemployment remained unchanged at 4.2% in the three months to September.
The number of job vacancies fell in the three months to October in a sign that the economy was slowing down.
The estimated number of vacancies during the period was 957,000, which was down 58,000 from May to July. It was the 16th consecutive period where the number of job openings has declined.
Watch: Pace of wage increases slows but unemployment rate unchanged
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