Warning decent pay rises 'could end' - but there is good news for Bank of England rate cut

A short spell of decent wage rises looks like it's ending after pay growth slowed to a two-year low.

Figures from the Office for National Statistics showed average wage growth dropped to 4.9% in the three months to August, down from 5.1%. Easing inflation means that, for most workers, their incomes are outstripping prices. Pay packets in so-called real-terms rose by 1.9%, but that was down from 2.2% over the previous three months.

Pay growth has fallen sharply after hitting a record high of nearly 8% in summer last year. Charlie McCurdy, economist at think tank the Resolution Foundation, said: “The jobs market continues to soften, with the number of workers in payrolled employment falling in August. This softening means that wage rises are also starting to weaken. Should these labour market trends continue, Britain’s brief era of healthy pay growth could soon end.”

Experts said the wage slowdown made a Bank of England rate cut next month nailed on. The Bank is expected to cut its base rate from 5% to 4.75%, further easing pressure on borrowers. Rob Wood, chief UK economist at Pantheon Macroeconomics, said “slowing wages make a November rate cut a slam dunk”.

The ONS data showed vacancies dropped by 34,000 to 841,000 in the three months to September, the lowest level since March to May 2021, while workers on UK payrolls also fell by 15,000 in September to 30.3million. The UK unemployment rate unexpectedly fell to 4% in the three months to August, down from 4.1% in the previous quarter, although the ONS said the estimate should be treated with caution.

There was a 373,000 jump in employment - the largest since records began in 1971 - taking the total number in work to 33.4 million in the quarter to August. TUC General Secretary Paul Nowak said: “People need jobs they can build a decent life on. But the Conservatives left behind a toxic economic legacy with record levels of economic inactivity, vacancies in decline and millions trapped in low-paid insecure work. The is an opportunity to repair and rebuild after 14 years of Tory destruction.”

Unite general secretary Sharon Graham said: “Today’s employment figures show an economy in need of investment and skills. Unite has called on changes to fiscal rules so Britain can borrow to invest and welcomes indications that the Chancellor has signalled this change. It is now imperative that we back Britain with a Budget that delivers serious investment in our industries and our public services, to generate the future jobs and the support that workers and communities desperately need.”

Official figures on Wednesday are also expected to show inflation falling sharply in September, with most economists forecasting a drop to 1.9% from 2.2% in August thanks to falling fuel prices in another boost to rate cut hopes.

READ MORE: