Average pay growth rose above inflation for the first time in almost two years, in a sign that the squeeze on living costs may be starting to ease.
Wages rose by 7.8% between June and August, according to official figures. It is higher than average inflation over the same three months, which measures the rate at which prices rise.
The last time that pay growth overtook price increases was in October 2021, which was during the Covid pandemic. However, the rise in wages is an average and does not mean that cost of living pressures are subsiding for everyone.
People employed in finance and business services saw the largest rise in annual pay, followed by those in the manufacturing sector. There continues to be a big gap between public and private sector pay.
Wage growth for public sector workers reached 6.8% between June and August, which the Office for National Statistics (ONS) said was the biggest increase since comparable records began in 2001.
But the average pay rises for private sector employees was 8%. The rate of Inflation has been slowing but, at 6.7% for the year to August, it remains more than three times higher than the Bank of England's 2% target.
New inflation figures will be released on Wednesday which are expected to show price rises are continuing to slow. Commenting on the wage figures, Chancellor Jeremey Hunt, said: “It's good news that inflation is falling and real wages are growing, so people have more money in their pockets.”
The Bank of England has been lifting interest rates to curb inflation. But last month, it held borrowing costs at 5.25% and, following Tuesday's wage growth figures, Capital Economics forecasts that interest rates have now hit their highest level for now.
“Cooling labour market conditions appeared to start feeding through into an easing in wage growth in August,” said Ashley Webb, UK economist at the research firm. “That supports our view that interest rates have peaked at 5.25%.
“But as we suspect wage growth will fall only slowly, interest rates will probably stay at their peak until late in 2024.” The number of job vacancies in the UK continued to fall, dropping by 43,000 to 988,000 between July and September.
It said that real estate companies had the sharpest fall in available jobs compared to other industries, with vacancies plunging by almost 30% compared to the previous three months. Despite the decline in overall figures, the total number of vacancies remains 187,000 above January to March 2020 before the Covid pandemic hit the economy.
— CutC by bbc.com
