Wage growth falls for second month in a row
The Office for National Statistics (ONS) reported that average weekly pay was up 2.4% in the three months to June, slightly down from 2.5% in May. Excluding bonuses, wages grew by 2.7%, down from 2.8% in May.
Emma-Lou Montgomery, associate director for Personal Investing at Fidelity International, said: “This will not be what the Bank of England will have wanted to see as one of the justifications for the Monetary Policy Committee’s decision to hike rates earlier this month was that it was expecting wage growth to start lifting off. This hasn’t happened yet.
“With wage growth continuing to slide and now at the same level as June’s CPI reading for inflation of 2.4%, UK households are likely to continue to feel the squeeze as their income fails to grow in real terms.”
Healthy labour market
Despite the disappointing wage numbers, 313,000 more people were in work in the April to June period compared to a year earlier, taking the total employment figure to 32.39 million.
More than half of this increase was due to 170,000 more women working full-time, with the number of men in full-time jobs increasing by 101,000 over the year.
The unemployment rate was 4% – its lowest level since February 1975.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “Strong jobs figures had been widely predicted, and falling unemployment and rising wages were a major part of the argument for the Bank of England raising interest rates in August. But while pay excluding bonuses rose at 2.7% – ahead of inflation, pay including bonuses was up just 2.4%. It puts wage growth after inflation at just 0.4% including bonuses and 0.1% without.
“Economists are predicting inflation figures tomorrow at 2.5%, so we will have to wait and see whether wages including bonuses have fallen behind inflation again.”
“Given that unemployment is so low and vacancies are at their highest level since comparable records began in April 2001 (829,000), we would usually expect faster wage increases. However, higher employment doesn’t appear to be feeding so strikingly into higher wages at the moment.”