UK regular pay growth slows for first time since January

UK regular pay growth slows for first time since January

By David Milliken

LONDON (Reuters) – 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, in a sign that the labour market is losing momentum. British average earnings, excluding bonuses, were 7.8% higher than a year earlier during the three months to August, down from an upwardly revised 7.9% 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. The latest reading from Britain’s Office for National Statistics was in line with expectations from economists polled by Reuters, but sterling fell slightly against the U.S. dollar after the data. “While wage growth is still much too strong for the Bank of England’s liking, there’s nothing in the latest data that’s likely to push the committee into a rate hike at the November meeting,” ING economist James Smith said. Private-sector regular pay – the component looked at most closely by the BoE – saw annual growth slow to 8.0% in the three months to August, from 8.1%. Annual growth in total pay – a more volatile measure which includes one-off bonuses – slowed more than expected to 8.1% in the quarter through August, from an unrevised 8.5% in the May to July period. However, with consumer price inflation of 6.7% in August, the real-terms increase in pay was far smaller.

Regular pay, adjusted for CPI inflation, grew by an annual 0.7% 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,” finance minister Jeremy Hunt said after the data. “To keep this progress, we must stick to our plan to halve inflation.” 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% in October 2022. SLUGGISH ECONOMY Bank of England Chief Economist Huw Pill said on Monday 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% 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% 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 1 million since the start of the pandemic. Unemployment figures and other related labour market data will not be published until Oct. 24, after the ONS said on Friday 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.

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