ay growth in the UK slowed slightly, with average wage increases including bonuses for the three months to August dipping to 8.1%.
That figure was slightly below economists’ expectations, boosting hopes that the Bank of England’s interest rates may have already peaked. Yesterday, the Bank’s chief economist Huw Pill said the Bank was still concerned that wages were growing too fast to keep inflation under control, but that there were signs of wage growth cooling.
However, fears that interest rates may rise further were renewed by the crisis in Gaza, which economists say could push oil prices above $100 a barrel, with knock-on effects on the cost of fuel for consumers. That could send inflation back up.
The latest growth figures show a slowdown from record highs reached in each of the last two releases.
Ashley Webb, UK economist at Capital Economics, said: “Wage growth has passed its peak. But we suspect it will fall only gradually from here.”
Pay continues to be faster than inflation, which was 6.2% in August.
The Chancellor of Exchequer, Jeremy Hunt said: “It’s good news that inflation is falling and real wages are growing, so people have more money in their pockets. To keep this progress, we must stick to our plan to halve inflation.”
But Rachel Reeves MP, Labour’s Shadow Chancellor, said: “Thirteen years of Conservative economic failure has left working people worse off, with low growth, low pay and high taxes.
“Working people saw pay rise faster under the last Labour government. But, with the Conservatives we have seen a decade of stagnant wage growth.
“Labour’s plan to grow the economy will boost wages, create good jobs and get Britain’s future back.”
Including bonuses, wages were up by 7.8%, in line with expectations. The ONS noted that this was “one of the highest regular annual growth rates since comparable records began in 2001”.
Yael Selfin, Chief Economist at KPMG UK, said: “Vacancy rates have generally impacted pay growth this year, with most sectors with higher vacancy rates experiencing stronger pay growth, reflecting recruitment and retention efforts by firms in a tight labour market. Now that the tide has turned, we expect less pressure on pay. Our forecast points to regular pay growth averaging 7.2% in 2023 and 4.9% in 2024. Annual regular pay growth was 7.8% in August, with growth of 8% in the private sector.
“The latest data indicates that some of the sharpest falls in vacancies have been in sectors which reported persistent skill shortages, including IT and finance. This may signal that the battle for talent has run its course. The overall number of vacancies in September was 314,000 (24%) down since the peak in the middle of last year.
“While the overall momentum of the economy is weak, the expected easing of inflation, coupled with earlier pay awards and the increase in the National Living Wage, should provide further improvements in consumers’ purchasing power and help alleviate the pressure on households.”
Mmeanwhile, the number of job vacancies dropped below a million, to 988,000, in a sign that labour demand is cooling.