Wages for British workers are rising at the fastest pace in two years, while demand for labor remains stagnant, according to the latest official data.
The UK unemployment rate remained stable at 4.2 percent in the three months to September, while the employment rate fell 0.1 percentage point to 75.7 percent over the same period, according to the Office for National Statistics (ONS).
Inflation-adjusted wage growth has returned from record highs, but pay packages are outpacing price growth at the fastest pace in two years. The increase is an average and does not mean that cost of living pressure will decrease for all workers.
The Office for National Statistics (ONS) said average regular earnings (excluding bonuses) rose 7.7 percent in the period, compared with a record 7.9 percent in the previous quarter.
The data showed wages rose by 1 percent adjusted for inflation, the highest real wage growth in the three months to September 2021.
Real wages have risen as inflation has begun to fall. The latest ONS inflation data, to be published on Wednesday, is expected to show headline inflation falling sharply from 6.7 percent in September to 4.8-5 percent in October.
The figures show the unemployment rate remained unchanged at 4.2 percent, but job openings fell to their lowest level in more than two years, falling to 957,000 from 58,000 quarter-on-quarter.
Darren Morgan, director of economic statistics at the ONS, said: “Our labor market indicators show a broadly unchanged picture, with the proportion in work, unemployed, not working or looking for work little changed from the previous quarter.”
“The number of vacancies has fallen for the sixteenth month in a row. However, job openings are still well above pre-pandemic levels.
“As inflation eased in the last quarter, real wages are now rising at their fastest pace in two years.”
Jane Gratton, from the British Chambers of Commerce, said the figures showed signs of a “cooling” in the UK labor market, with vacancies continuing to fall and unemployment stagnating, but stressed businesses remained under pressure.
“Employers are still struggling as wages continue to rise faster than inflation and the impact of fourteen successive interest rate hikes begins to be felt. Worryingly, the flow of unemployed people returning to work appears to have stalled.
“A thriving economy requires a skilled and flexible workforce in every region and industry. That’s why the UK Government and employers must invest now to tackle the skills shortage that is holding everyone back.
“The job market remains very tight and companies are still struggling to hire the people they need,” said Alexandra Hall-Chen, policy adviser at the Institute of Directors.
Chancellor Jeremy Hunt said: “It’s good to see inflation falling and real wages rising, leaving more money in people’s pockets.”
Some economists believe slowing wage growth, coupled with data showing zero growth in the July-September period, will prompt the Bank of England to refrain from raising interest rates further.
Members of the bank’s Monetary Policy Committee (MPC) said they would closely monitor the strength of collective bargaining agreements amid concerns they could be a driver of persistent inflation.
Hugh Pill, the bank’s chief economist, said he believes wages in Britain are rising too quickly to meet the 2 percent inflation target. The latest data showed modest wage growth, but added: “Wage growth has remained very strong over the summer and we certainly will not see wages rising at the rate consistent with continuing to hit the 2 percent inflation target.”
Samuel Tombs of Pantheon Macroeconomics said: “Wage growth is slowing so quickly that the Monetary Policy Committee (MPC) may conclude that the key interest rate is already high enough at 5.25 percent.”
“This delay should allow the MPC to begin cutting bank rates from May, likely by around 75 basis points through 2024.”
Paula Bejarano Carbo of the NIESR Institute for Economic Research expects wage growth to remain historically high in the final quarter of the year. ONR employment data “suggests the UK unemployment rate was broadly unchanged at 4.2 per cent for the quarter, while job vacancies fell by 58,000 in the three months to October; “These data suggest that the labor market continues to slowly calm, leading us to expect wage growth to remain historically strong in the fourth quarter.”
Interactive Investor’s Victoria Fellow said: “The Government and Bank of England continue to prioritize reducing inflation, even if this comes at the expense of economic growth.” inflation”.
Source: I News
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