Earnings, excluding bonuses, were 7.7% higher than a year earlier in the period from July to September, official data shows.
British wage growth has lost a bit of its breakneck speed in the three months to September but remained close to its record, according to figures from the Office for National Statistics (ONS).
Earnings excluding bonuses (regular pay) were 7.7% higher than a year earlier in the third quarter (Q3), representing a slight slowdown in regular pay growth from 7.8% in the previous ONS report, the highest since the data collection began in 2001.
The annual growth in total pay (including bonuses) slowed to 7.9% from 8.2% for the same period.
When adjusted for inflation, total pay rose by 1.4% and regular pay by 1.3%, compared to the same period the previous year.
“With inflation expected to have cooled significantly last month it is an indication that the worst of the cost-of-living squeeze might be over,” said the head of financial analysis at AJ Bell Danni Hewson.
The finance and business services sector saw the largest annual regular growth rate at 9.4%, followed by the manufacturing sector at 7.7%.
When the good news turns out to be bad news
The Bank of England (BoE) is watching pay growth as it assesses how much inflation pressure remains in Britain’s economy after it raised interest rates 14 times in a row between December 2021 and August this year, since then it has kept rates on hold.
The high rate of growth in earnings may lead to a boost in domestic consumption. On the one hand, this is contributing to GDP, on the other, outstanding growth in consumption could push inflation further up, eliminating hopes that the BoE is done tightening its monetary policy, which has squeezed investments in the last months, dragging down the economy.
“It(wage growth, ed.) is still historically high and will make for uncomfortable reading by MPC (the Bank of England’s Monetary Policy Committee) members when they next meet in December,” said Hewson.
“If households are feeling more confident and have a bit more room in the budget they are likely to spend that cash, which could prove inflationary.”
Other indicators linked to Britain’s jobs market have suggested a cooling of the inflationary heat in recent months – and fresh data showed a drop in vacancies may also support this sentiment.
The labour market is ‘cruising along’
Vacancies have been falling for the sixteenth consecutive time, for the period in the three months to October, the estimated number of vacancies was 957,000, a decrease of 58,000 from May to July 2023. This is the lowest level since the April-to-June period in 2021.
According to the ONS, the industry sector is showing the largest annual decrease in the number of vacancies, falling by 35,000 from the same period last year.
The latest labour market figures suggest that the unemployment is unchanged at 4.2%.
“The numbers released indicate the UK labour market is cruising along despite tricky economic conditions,” said Hewson. “Vacancy numbers have dropped off once again but there are still more than 950,000 positions that need to be filled if businesses are to fulfill their potential.”
“The labour market remains very tight and businesses are still struggling to hire the people they need,” added policy advisor at the Institute of Directors Alexandra Hall-Chen.
“While there is some uncertainty around the accuracy of this data release, other indicators also suggest the labour market is gradually cooling, not collapsing,” Jake Finney, an economist at PwC UK, said.
Sterling rose against the US dollar after the ONS released its figures.