The latest figures from the UK’s Office for National Statistics (ONS) reveal that between July and September, regular pay grew at an annual rate of 7.7%, which was higher than the average inflation rate over the same period. This marks the most significant increase in pay growth compared to inflation in two years, indicating a potential easing of the squeeze on living costs. However, the number of job vacancies fell for the 16th consecutive month, which is a sign of the weakening job market.
Although the estimated number of job vacancies in the country still remains above the pre-pandemic levels, the fall of 58,000 between August and October has started to worry economists and policymakers. The UK unemployment rate remained largely unchanged between July and September, at 4.2%. Despite this, the ONS warned that the data was collected in a way that may have caused issues with the figures.
The latest figures also showed that regular pay, which excludes bonuses, rose by 1% after taking account of inflation. This increase was the most significant since the three months leading to September 2021. The rise in wages is, however, due to slowing price rises rather than significant pay jumps.
Wage growth is dwindling in some areas since expectations of future price rises are diminishing, and the job market is weakening. The Bank of England predicts that this could cause unemployment to rise to 5% next year and lead to more than 150,000 job losses, further contributing to the slowing of wage growth.
Next week’s Autumn Statement will announce how much the National Living Wage will rise by next spring, which the Chancellor has already pledged will be at least £11 per hour for the main rate, a rise of over 5%, or £1,000 per year for a full-time worker. Employers, however, are worried about the impact this could have on costs as businesses begin to feel the pinch.
In conclusion, while the 7.7% increase in annual pay is higher than inflation, the weakening job market and falling vacancies suggest that wage growth may slow down further. Despite this, the forthcoming rise of the National Living Wage has been met with mixed reactions, with some supporting it and others fearing it could lead to further hikes in prices
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