Wages are growing at a faster rate than inflation, new figures from the Office for National Statistics (ONS) have revealed, providing workers with a real terms pay increase.
Its latest jobs data found that the annual growth in total pay (which includes bonuses) was 7.9%, while in regular pay (excluding bonuses) wages rose 7.7% between July and September 2023.
The ONS noted these figures were slightly down on previous periods, but nonetheless among the highest growth rates since records began in 2001. They also exceed the consumer prices index measurement of inflation, meaning that in real terms total pay grew by 1.4% and regular pay rose by 1.3%.
The data also confirmed that the number of vacancies between August and October reduced by 58,000 to 957,000. That’s the 16th consecutive period in which vacancies have dropped.
The employment rate dropped only marginally to 75.7%, while the unemployment rate was largely unchanged at 4.2%.
Beating inflation
Sarah Coles, head of personal finance at Hargreaves Lansdown, said that wages were “flying high again, well ahead of inflation” which was putting some distance between pay and price rises.
Despite this, she observed that the wider jobs market is hitting a “rougher patch”, with things becoming tougher for those trying to find or keep a job in the coming months.
She continued: “The Bank of England is forecasting for the picture to deteriorate in the coming months, predicting unemployment rising to 4.3% in the last three months of this year, hitting 4.7% a year later, 5% the year after that and 5.1% by the last three months of 2026. This isn’t just higher than it previously expected, the rises are expected to go on for longer too.”
Don’t be distracted by average wage growth
Alice Haine, personal finance analyst at Bestinvest, said that it was important to recognise that the reported wage increases are an average, and so do not mean that the cost-of-living challenges are easing for everyone.
“Whether someone is really gaining from the bumper wage growth of late comes down to the industry they work in and whether or not they are employed by the public or private sector,” she continued.
Drop in worker demand
Martin Beck, chief economic adviser to the EY ITEM Club, noted that the drop in job vacancies to the lowest level since spring 2021 indicates a “further cooling in demand for workers”.
He added that the overall story was one of labour market conditions loosening, but only very gradually.
“As things stand, the labour market offers no obvious reason for the Monetary Policy Committee to return to increasing rates, but equally, little cause for near-term cuts either.”
