UK wage growth has edged back from record highs but earnings are outstripping inflation at the fastest pace for two years, according to official figures.
The Office for National Statistics (ONS) said average regular earnings, excluding bonuses, increased by 7.7% in the three months to September, down from am upwardly revised and record high of 7.9% in the previous three months.
The data showed that wages rose 1% after taking Consumer Prices Index inflation (CPI) into account, the highest increase in real wages since the three months to September 2021.
Britain’s rate of unemployment is estimated to have remained unchanged at 4.2% in the third quarter but more cracks are appearing in the jobs sector, with vacancies falling to the lowest level for more than two years, down 58,000 quarter-on-quarter at 957,000.
Darren Morgan, ONS director of economic statistics, said: “Our labour market figures show a largely unchanged picture, with the proportions of people who are employed, unemployed or who are neither working nor looking for a job all little changed on the previous quarter.
“The number of job vacancies fell for the 16th straight month. Nevertheless, vacancies still remain well above their pre-pandemic levels.
“With inflation easing in the latest quarter, real pay is now growing at its fastest rate for two years.”
More real-time data showed that the number of UK workers on payrolls rose by 33,000 – or 0.1% – between September and October to 30.2 million, although the ONS cautioned this was subject to revision.
It revised the payroll data for September to a month-on-month rise of 32,000.
Chancellor Jeremy Hunt said: “It’s heartening to see inflation falling and real wages growing, keeping more money in people’s pockets.”
Economists said the drop in wage growth, together with last week’s official data showing a stalling economy with zero growth in the third quarter of the year, would likely persuade the Bank of England to hold off from further interest rate rises.
Policymakers at the Bank are watching wage growth intently, with the recent record highs having been a cause for concern in its battle to bring sky-high inflation back down to the 2% target.
Rates are now widely seen as having peaked at 5.25% and with the threat of recession looming large, some economists believe the Bank will move to begin cutting borrowing costs in 2024.
Samuel Tombs at Pantheon Macroeconomics said: “Wage growth is slowing sufficiently quickly for the Monetary Policy Committee (MPC) to conclude that Bank Rate already is high enough at 5.25%.
“This slowdown should pave the way for the MPC to start to reduce Bank Rate from May, and probably by about 75 basis points over the course of 2024.”
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