Wage Growth Slows in UK as Concerns About Inflationary Pressures Mount

Wage Growth Slows Slightly But Still Near Record High

On November 14, the Office for National Statistics (ONS) revealed that wages for the period of July-September rose by 7.7% year-on-year on a non-bonus basis, marking a slight deceleration in the rate of increase while remaining close to the highest ever recorded. This announcement has raised concerns about inflationary pressures, with the Bank of England closely monitoring the situation.

Market estimates, as compiled by Reuters, had projected a 7.7% rise, and the actual figures align closely with these expectations. The last two increases in wage growth were recorded at 7.9%, representing the highest levels seen since 2001 when statistics for this indicator began.

However, this growth rate is not uniform across all sectors. While wages, including variable bonuses, saw a 7.9% rise, there has been a slight slowdown from the 8.2% increase recorded in the preceding June-August period. The central bank acknowledges that this deceleration is not rapid enough to warrant an interest rate cut, but their unofficial measure of wage growth has not matched the ONS’s figures.

Following the release of the statistics, the pound experienced a modest increase in value against the dollar and the euro, reflecting the nuanced impact of these wage developments on the currency market.

Alexandra Holchen, a policy advisor at the Institute of Directors, observed that the labor market continues to face challenges, with companies struggling to find the talent they require. ING economist James Smith noted a potential decline in private sector wage growth, indicating that the central bank’s forecast of 6.6% next March may materialize, possibly leading to a future interest rate cut.

While these wage increases have brought positive news for workers, the number of job openings has dwindled, reaching the lowest levels since 2021. The ONS’s experimental unemployment rate measure remained steady at 4.2%, indicating a somewhat stable but cautious employment landscape.

It is essential to remain vigilant regarding the accuracy of these statistics, as noted by economist Jake Finney at PwC UK, who pointed to other indicators suggesting a potential slow down in the labor market. Meanwhile, Tony Wilson, director of the Employment Research Institute, emphasized the need for expanded job support to address job losses in vulnerable sectors such as hospitality and construction.

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On November 14, the Office for National Statistics (ONS) announced that wages for the period July-September rose by 7.7% year-on-year on a non-bonus basis, slowing slightly but still at a rate of increase close to the highest ever. . Photo taken in London in September (2023 Reuters/Toby Melville)

LONDON (Reuters) – The Office for National Statistics (ONS) announced on the 14th that wages for the July-September period rose 7.7% year-on-year, excluding bonuses, slowing slightly but still at the level highest ever. was close to that

Bank of England concerns about inflationary pressures do not appear to be easing.

Market estimates compiled by Reuters were for a rise of 7.7%. The last two increases were 7.9%, the highest since statistics began in 2001.

Wages, which often include variable bonuses, rose 7.9%, slowing from an increase of 8.2% in the June-August period.

The central bank says wage growth is slowing too slowly for it to consider cutting interest rates, but it also notes that its unofficial measure of wage growth has not risen as much as the Office for National Statistics measure.

Following the release of the statistics, the pound rose slightly against the dollar and the euro.

“The labor market is still very tight. Companies continue to have problems finding the talent they need,” said Alexandra Holchen, policy advisor at the Institute of Directors.

ING economist James Smith said private sector wage growth had slowed from 8.1% to 7.8%, putting the central bank’s forecast of 6.6% next March on track to be realised. He said there was a possibility of decline. If there is a further increase, the first cut in the interest rate could be implemented in August next year.

The number of job openings was the lowest since April-June 2021.

The ONS’s experimental unemployment rate measure, which is meant to compensate for a fall in response rates to the regular Household Labor Force Survey, remained steady at 4.2%.

The number of employed people increased by 54,000 in the July-September period. A market forecast compiled by Reuters had predicted a significant decline.

Jake Finney, economist at PwC UK, said: “While there is some uncertainty about the accuracy of these statistics, other indicators suggest that the labor market is slowly slowing down.

Tony Wilson, director of the Employment Research Institute, said job losses were seen in occupations more vulnerable to the economic slowdown, such as hospitality and construction. He said too many people are unemployed and not looking for work, pushing wages up and the government needs to expand job support.

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