Average wages rose by 7.8% between June and August, overtaking inflation for the first time since 2021, according to official figures.
With the rate of wage growth now higher than the rate of inflation, at 6.7%, this could suggest that, some people at least, the cost-of-living crisis may be easing.
The annual growth in total pay, including bonuses, was 8.1% but this figure was affected by one-off NHS and civil service payments.
The annual growth rate when adjusted to inflation was 1.3% for total pay and 1.1% for regular pay.
In the public sector, average wage growth was 6.8%, the highest figure since 2001. In the private sector, it was 8.0%, one of the largest figures seen outside of the coronavirus pandemic, according to the Office for National Statistics (ONS).
Between July and September, the number of job vacancies was 988,000, a drop of 43,000 from April to June, suggesting that employers were growing cautious about hiring.
This is the 15th consecutive month that vacancy numbers have fallen, down by 4.2% since April to June.
Total job vacancies were down by 256,000 annually, but 187,000 above the level seen between January and March 2020, before the coronavirus pandemic hit.
‘Risk of fuelling inflation’
Alice Haine, personal finance analyst at Bestinvest, said: “While high wage growth can ease the financial squeeze for households, it runs the risk of fuelling inflation if businesses pass on that cost to customers by hiking the price of their goods and services. This would only add further pressure to household finances at a time when energy prices are under threat from geopolitical tensions and rising demand amid the colder weather.
“As businesses prepare budgets for 2024, staff pay and retention will come under the spotlight with some employers choosing to pause hiring and expansion targets as they wait to assess market conditions.
“Headline Consumer Prices Index inflation may be expected to ease further as the year goes on, but for households still contending with high living costs, the dark cloud of uncertainty that comes with job insecurity may deliver another blow.”
A key consideration for the Bank of England
Rob Morgan, chief investment analyst at Charles Stanley, said: “Wage growth is one of the key considerations for the Bank of England when it comes to setting interest rates as it can make inflation more persistent. It is an important data point it will consider as it judges whether or not to resume raising interest rates when it next meets in November.
“Although the rise in pay growth is still much higher than the Bank of England would like, it is poised to moderate as economic conditions remain tight and the employment picture darkens.
“There are now clear signs of this with job vacancies now down by almost a quarter since peaking midway through last year. Alongside other factors including slowing food prices it should take some pressure off wage demands and help persuade the BoE to keep rates on hold.”
