British Wages Show Slight Slowdown in Growth, According to Official Data
British wages grew slightly less fast in the three months to September, but remained close to their record pace, according to official data from the Office for National Statistics (ONS). The figures, released on Tuesday, revealed that earnings excluding bonuses were 7.7% higher than a year earlier in the third quarter. This represented a slight slowdown in regular pay growth from 7.9% in the previous two ONS reports, which were the highest recorded since data collection began in 2001.
The Bank of England (BoE) has been closely monitoring pay growth as it assesses inflation pressures in the UK economy. The central bank raised interest rates 14 times in a row between December 2021 and August this year, and has since kept rates on hold. Including bonuses, pay growth slowed to 7.9% from 8.2% in the three months to August.
Commenting on the data, Alexandra Hall-Chen, a policy advisor at the Institute of Directors, highlighted the ongoing challenges faced by businesses in hiring the necessary workforce: “The labour market remains very tight and businesses are still struggling to hire the people they need.”
Sterling saw an increase against the U.S. dollar following the release of the ONS figures.
While the BoE has indicated that pay growth is dropping too slowly for it to consider cutting interest rates, the central bank has also noted that unofficial estimates of wage increases suggest a less steep climb than the ONS numbers.
Other indicators of Britain’s job market have pointed towards a cooling of inflationary pressures in recent months. In fact, the data from Tuesday’s release showed a decline in vacancies to their lowest level since the April-to-June period in 2021.
According to experimental figures the ONS is using to offset a drop in response rates to its usual Labour Force Survey, Britain’s unemployment rate held at 4.2%. This figure seeks to measure changes in employment and unemployment.
Surprising economists who had predicted a sharp fall, employment actually rose by 54,000 in the three months to September.
“While there is some uncertainty around the accuracy of this data release, other indicators also suggest the labour market is gradually cooling, not collapsing,” noted Jake Finney, an economist at PwC UK.
Looking ahead, finance minister Jeremy Hunt welcomed the increase in wages when adjusted for inflation. He highlighted that inflation had fallen from its high of over 11% just over a year ago and is expected to dip under 5% in the data due to be published on Wednesday. Hunt also stated that his update on the budget and economic count on November 22 would include “plans to get people back into work and deliver growth for the UK.”
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