01.09.2018

UK pay growth speeds up

UK pay growth speeds up

Figures from the Office for National Statistics (ONS) show that UK wages have increased by 2.9% excluding bonuses. Earnings in the UK have now been higher than the inflation rate for four months and further research by the ONS has revealed that unemployment has dropped by 55,000.

Now, there are 1.36 million unemployed people in the UK leaving the jobless rate at 4% and, although the figure is still relatively high, this statistic is at its lowest level for over 40 years.

 

Economic growth

As of September 2019, the UK’s economy has grown by 0.6%, the best figure since July 2017. Alongside this, incomes are up by 2.9% - a figure which hasn’t been beaten since July 2015.

However, because July’s inflation rate was 2.5%, real wage growth only increased by 0.5% between May and July when all factors are considered.

 

Will this prompt a raise in inflation or interest?

The ONS commented on the report, saying that the labour market is “robust” because of the number of people currently employed is “still at historically high levels”.

David Freeman, the head of labour market statistics at ONS, said "With the number of people in work little changed, employment growth has weakened.

"Meanwhile, earnings have grown faster than prices for several months, especially looking at pay excluding bonuses".

A UK economist for Capital Markets, Andre Wishart, said that the figures by ONS indicate "competition for workers is finally starting to provide greater support to wages".

Mr. Wishart went on to say that he doesn’t predict that the Bank of England will raise interest because of the higher wages in this statement. "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”.

The Bank of England’s current interest rate is at 0.75%, its highest level since March 2009. The key interest rate was raised by the Bank of England for the second time in a decade just last month.

A senior economist at Hargreaves Lansdown, Ben Brettell. said that these new employment figures by the ONS suggests that the Bank of England were correct to raise their interest rates in the previous month.

However, he warned about what could happen if wages increased and rates stayed the same by stating that "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".

 

Job opportunities in the UK

Esther McVey, the Secretary of State for Work and Pensions said that "since 2010 we have delivered significant growth in jobs, and in the last six months we've seen real-terms wage growth.

"We haven't had a lower unemployment rate for over 40 years and I'm especially proud that youth unemployment is at a record low, falling by over 45% since 2010 - opening up career opportunities for our next generation".

The ONS said that they found job vacancies have increased by 14,000. Overall, the number of vacancies is at a record high at 833,000.

The head of economic at the British Chambers of Commerce (BCC), Suren Thiru said that the number of vacancies was “alarmingly high” and suggested that this was "further evidence of persistent skills shortages".

"While the number of people in work stands close to historic highs, firms continue to report that attempting to recruit staff with the right skills is an increasingly uphill struggle, which is stifling their ability to grow and boost productivity,"