UK wage growth slips as job vacancies decline
Wage growth has stalled and the UK jobs market is showing signs of cooling, according to figures published by the Office for National Statistics.
Real pay growth, which excludes bonuses, slipped back from 7.8% to 7.3% in the three months to October while the number of vacancies dropped. Markets had expected an acceleration of 7.4%. Total pay growth has fallen from 8.5% to 7.2%.
However, despite slowing, earnings are still outpacing inflation and the Bank of England has warned that expectations of interest rate cuts any time soon may be premature. The Bank is expected to hold the base rate at 5.25% when it meets on Thursday.
The UK unemployment rate stayed unchanged at 4.2% in the quarter as the number of vacancies fell for the 17th month in a row, down by 45,000 in the three months to November to 949,000 – the longest period of decline on record.
Sterling tumbled to $1.2561 in an immediate reaction to the data.
Chancellor Jeremy Hunt said: “It’s positive to see inflation continue to fall and real wages growing.
“At the Autumn Statement, I announced an ambitious set of measures to get more people into work and boost economic growth.
“This includes a significant expansion of health support and an over £9 billion per year tax cut for employees and the self-employed, worth over £450 for the average worker.”
Ben Harrison, director of the Work Foundation, a think tank for improving working lives in the UK: said: “Today’s limited data release shows workers have seen real pay grow by 1.4% on the year as wages continue to rise above inflation.
“This strong wage growth risks hiding the fact that the majority of workers are poorer than in 2008, and the Office for Budget Responsibility have warned real wages will not return to those levels until 2028.
“With a slowdown in hiring as vacancies falling for the 17th consecutive quarter to 949,000 and economic inactivity holding steady at 20.9%, we may see the strong levels of wage growth subside quickly in the New Year. This could be particularly bad news for workers in sectors such as construction, where pay growth is only just above inflation.
“At the Autumn Statement, the Chancellor announced further ‘carrot and stick’ measures to get people with long-term health conditions back to work. Due to data limitations, we have had no new insight on the levels of inactivity due to long-term sickness in the UK since September – which had hit a record 2.6 million people.
“Given new measures could see benefits withdrawn from those with long-term health conditions and disabilities if they are unable to find a job within 18 months, it is vital the Office for National Statistics revert to normal service so the impact that both the rhetoric and policy measures have on some of the most vulnerable people in society can be analysed.”