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Wage growth beats expectations

by: Paloma Kubiak
  • 11/09/2018
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Wage growth beats expectations
Earnings for British workers in the three months to July defied expectations, while unemployment levels continued to drop.

 

The Office for National Statistics (ONS) estimated that average weekly pay in nominal terms (not adjusted for inflation) was up 2.6% including bonuses, and 2.9% excluding bonuses in the three months to July compared to a year earlier.

This is up on the 2.4% and 2.7% respectively reported last month.

When adjusted for inflation, the figures came in at 0.2% and 0.5% respectively.

Tom Stevenson, investment director for personal investing at Fidelity International, said despite the rise, consumers should not get too excited.

He said: “The ONS thinks there’s an element of catch-up after a weak reading a year ago. Also, with the latest Consumer Prices Index reading showing inflation currently running at 2.5%, household incomes in the UK are barely keeping up with price rises.

“The Bank of England expects a further rise in wage growth over the next year but with a huge amount of uncertainty around the Brexit negotiations, there are risks to that optimistic outlook.”

 

Unemployed numbers decline

While the wage growth figures show positive signs, the number of people in work was little changed between February to April and May to July 2018.

There were 32.4 million people in work – an extra 261,000 from a year earlier. The employment rate for the three month period stood at 75.5%, falling back from the 75.6% reported last month.

The ONS reported there were 1.36 million unemployed people, 55,000 fewer than in the three months to April, and 95,000 less than in the year before. As such, the unemployment rate came in at 4%. It has not been lower since December 1974 to February 1975.

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