LONDON – Wages in Britain are beginning to creep up, official figures showed Wednesday, but are still lagging the rise in prices, meaning households continue to experience a real-terms pay cut as they prepare for Christmas.
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The Office for National Statistics said average weekly earnings in the three months through October were 2.5 percent higher than the year before when including bonus payments, notably from the financial sector, and up 2.3 percent when bonuses are excluded.
Though up from the previous rates of 2.3 percent and 2.2 percent, pay growth is running lower than the equivalent 3 percent annual inflation rate recorded in October. Figures on Tuesday showed inflation up further in November to 3.1 percent, its highest since March 2012.
The difference between pay growth and price rises means the majority of working people are effectively seeing pay cuts.
That's been the case for the past few months as inflation has been stoked by the pound's sharp fall in the wake of the June 2016 referendum to leave the European Union. The 15 percent decline in the pound has raised the cost of many imported goods, particularly food and oil.
Elsewhere, the statistics agency said the unemployment rate remained at 4.3 percent, its lowest level since 1975, despite a 56,000 quarterly fall in the number of people in employment. In what could be a worrying sign, it said that there was a rise in the number of people who were neither working nor looking for a job.
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Policymakers at the Bank of England, who are expected to keep their benchmark interest rate unchanged at 0.5 percent on Thursday, have laid out the hope that the tight labor market will start to fuel wage increases, helping the British economy to navigate the choppy waters ahead of Brexit, which is due to take place in March 2019.
However, Samuel Tombs, chief U.K. economist at Pantheon Macroeconomics, said there's little prospect of a marked uptick in wages. He pointed to the recent decline in consumer confidence, which is likely to limit job-to-job moves, which in turn can ease the pressure on firms to raise wages.
He also noted that the 1 percent cap on pay rises in the public sector will remain in place for most workers next year, while the 4.4 percent increase in the National Living Wage is only a tad higher than this year's 4.2 percent.
"We see little reason to expect wage growth to strengthen materially soon," he said.