UK wages continue to outstrip the inflation rate
Wages saw faster than expected growth in the three months to July, as they continued to outstrip rising prices. Excluding bonuses, wages grew by 2.9%, according to figures from the Office for National Statistics (ONS), well above the inflation rate.
Earnings have now outstripped inflation for four months. Unemployment continued to fall, dropping by 55,000 to 1.36 million, with the jobless rate remaining at 4%, its lowest level for over 40 years.
The number of people in work was unchanged at 32.4 million. The ONS said the labour market was “robust” with the number of people in work “still at historically high levels”.
“With the number of people in work little changed, employment growth has weakened,” said the ONS’s head of labour market statistics, David Freeman.
“Meanwhile, earnings have grown faster than prices for several months, especially looking at pay excluding bonuses.”
The inflation rate for the three-month period to July was 2.4%, with the rate for just July slightly higher at 2.5%.
Andrew Wishart, UK economist at Capital Markets, said the figures indicated that “competition for workers is finally starting to provide greater support to wages”.
However, he does not expect the rosier picture for wages to prompt an interest rate rise from the Bank of England.
“We still think that the MPC will hold off raising interest rates again until the near-term uncertainty due to the Brexit negotiations is resolved,” he added.
The Bank of England raised its key interest rate for only the second time in a decade last month. The current interest rate of 0.75% is the highest since March 2009.
Ben Brettell, senior economist at Hargreaves Lansdown said the latest employment figures showed that the Bank of England was right to raise rates last month. “The Bank looks at wage growth as a key driver of inflation.
“The problem is that if wages grow without corresponding productivity growth – as we’ve seen in the UK – it means more money chasing the same quantity of goods and services, which pushes up prices,” he warned.