Wages rise 2.5% in the year but ‘little reason to cheer’
The number of people in work fell for the second time in a row while wages rose 2.5% in the year to October. But the cost of living continues to overshadow pay gains.
The employment rate between August and October 2017 was 75.1%, down from the 75.3% recorded in the preceding three months, but up from 74.4% a year earlier, according to the Office for National Statistics (ONS).
There were 32.08 million people in work, 56,000 fewer than in the May to July period, but 325,000 more than for a year earlier.
Unemployment over the three months came in at 4.3%, down from 4.8% for a year earlier. This is the joint lowest rate since 1975. In total, there were 1.43 million unemployed people, 26,000 fewer than recorded in the previous three months and 182,000 fewer than a year earlier.
While the labour market data has cooled a little, wages are showing some positive signs, the data reveals.
Average weekly earnings for employees in nominal terms (not adjusted for inflation) increased by 2.5% including bonuses, and 2.3% excluding bonuses.
However, when taking inflation into consideration, average weekly earnings for employees in real terms fell by 0.2% including bonuses and 0.4% excluding bonuses.
This means wages still lag inflation which was held at 3% for October.
Ben Brettell, senior economist at Hargreaves Lansdown, said: “The labour market remains robust, with employment close to all-time highs and plenty of vacancies if you’re seeking work. The pay squeeze continues for now, but with wages growing a little more strongly and inflation set to fall back in the new year, this looks like it’ll come to an end in the next few months.
“We should remember, however, that the only true driver of real pay growth and rising living standards is productivity growth. This is something the UK has struggled with since the financial crisis, and as yet nobody seems to have solved the puzzle.”
Maike Currie, investment director for personal investing at Fidelity International, said consumers will have little reason to cheer this festive season as the cost of living continues to outpace their earnings growth.
“This will be a bitter pill to swallow for consumers, particularly with Christmas just around the corner.
“The combination of glacial wage growth and high inflation, means UK households are getting progressively poorer as each month rolls by. As a result, our savings and investments need to do more heavy lifting to generate a real return. Leaving your money languishing in cash is a fool’s errand – if you’re expecting a festive boost to your cash savings rate from your bank, you’re more than likely to be disappointed.”
Currie added that going into 2018, we should “expect lower-for-longer rates to continue being the borrower’s gain and the saver’s pain”.