Cliff Notes
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UK wage growth has slowed, with average weekly earnings now at 4.6%, down from 5%, while inflation stands at 3.6%, narrowing the gap between pay increases and price rises.
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The number of job vacancies has decreased for the 37th consecutive period, particularly in the hospitality and retail sectors, indicating a slowing labour market.
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Economists predict further declines in wage growth and rising redundancies, potentially pushing unemployment higher amidst increasing labour costs and possible tax rises.
Wage rises slow as retail and hospitality jobs continue to fall | Money News
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The rate of wage rises in the UK continued to slow as the number of job vacancies and people in work fell, according to new figures.
Average weekly earnings slowed to 4.6% down from 5%, while pay excluding bonuses continued to grow 5%, according to data from the Office for National Statistics (ONS) for the three months to June.
It means the gap between inflation – the rate of price rises – and wage increases is narrowing, and the labour market is slowing. Inflation stood at 3.6% in June.
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The number of employees on payroll has fallen in ten of the last 12 months, with the falls concentrated in hospitality and retail, the ONS said. It came as employers faced higher wage bills from increased minimum wages and upped national insurance contributions.
As a result, it’s harder to get a job now than a year ago.
“Job vacancies, likewise, have continued to fall, also driven by fewer opportunities in these industries,” the ONS director of economic statistics, Liz McKeown, said.
The number of job vacancies fell for the 37th consecutive period and in 16 of the 18 industry sectors. Feedback from employers suggested firms may not be recruiting new workers or replacing those who left.
Unemployment remained at 4.7% in June, the same as in May.
The ONS, however, continued to advise caution in interpreting changes in the monthly unemployment rate due to concerns over the figures’ reliability.
The exact number of unemployed people is unknown, partly because people do not respond to surveys and answer the phone when the ONS calls.
The worst is yet to come
Wage rises are expected to fall further, and redundancies are anticipated to rise.
“Wage growth is likely to weaken over the course of the year as softening economic conditions, rising redundancies and elevated staffing costs increasingly hinder pay settlements,” said Suren Thiru, the economics director of the Institute of Chartered Accountants in England and Wales (ICAEW).
“The UK jobs market is facing more pain in the coming months with higher labour costs likely to lift unemployment moderately higher, particularly given growing concerns over more tax rises in this autumn’s budget.”
What does it mean for interest rates?
While wage rises are slowing, the fact they’re still above inflation means the interest rate setters of the Bank of England could be cautious about further cuts.
Higher pay can cause inflation to rise, which the central bank is mandated to bring down to 2%.
But one more interest rate cut this year, in December, is currently expected by investors, according to data from the London Stock Exchange Group (LSEG).
The evidence of a weakening labour market provides justification for the interest rate cut of last week.
