UK wage growth slumps to three-year low as jobs market slowss | Personal Finance | Finance
Wage growth in the UK has plummeted to its lowest level in over three years as companies continue to clamp down on hiring, the latest official figures have revealed.
The Office for National Statistics (ONS) said regular wage growth, excluding bonuses, fell to 4.8% in the three months to July, down from 5% in the previous quarter and the lowest since May 2022. Despite wages still outpacing inflation, the rate of real earnings growth – taking into account the Consumer Prices Index (CPI) – has slowed to 1.2%, marking the lowest point since September 2023.
However, the data indicated an increase in total wage growth, including bonuses, rising to 4.7% in the quarter to July, up from 4.6% in the three months to June.
This crucial figure for the pensions triple lock calculation suggests pensioners are set for a 4.7% increase in the state pension next year, experts have said.
The ONS reported that the unemployment rate remained steady at 4.7% in the three months to July, although it reiterated caution about the reliability of this statistic due to ongoing changes in the workforce survey.
But there was a decrease of 8,000 in the number of payrolled workers last month and another drop of 10,000 in job vacancies over the quarter to August.
Liz McKeown, ONS director of economic statistics, said: “The labour market continues to cool with the number of people on payroll falling again, while firms also told us there were fewer jobs in the latest period.”
She added: “The number of vacancies also fell on the quarter, though the rate of decline appears to be slowing.”
Official figures showed a modest quarterly drop in vacancies, down 1.4% to 728,000 quarter-on-quarter in the three months to August.
In an encouraging sign, vacancies were actually 8,000 higher when compared with the three months to July.
Economists noted the decrease in payrolled workers – to 30.3 million last month – was also at a slower pace in recent months.
Matt Swannell, chief economic adviser to the EY Item Club, said: “The jobs market continues to loosen very slowly.
“The gradual adjustment in the jobs market continues to come through a slow change in companies’ hiring intentions, rather than large-scale lay-offs. Vacancies ticked up in August, although they remain below pre-pandemic levels, while there were no signs of rising redundancies.”
He suggested that the Bank of England – which announces its latest interest rate decision on Thursday – was likely to continue prioritising the need to get “on top of inflation and less on protecting the jobs market”.
“There are few signs that inflationary pressures have eased, as businesses continue to pass on the rise in National Insurance Contributions (NICs), and while the Monetary Policy Committee’s focus will now turn to the prices data, there are few signs that the jobs market is in need of immediate support,” he said.
Experts widely anticipate that the Bank will maintain rates at 4% in this month’s decision, with many viewing another cut as unlikely until 2026.
