UK’s bumper pay rises show inflation is tricky to shift
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Labour market figures do not yet show effects of Rachel Reeves’s tax hikes on employers in the budget. Business figures have been sounding increasingly alarmed about the state of the UK’s jobs market in recent days, with the recruiter James Reed claiming it augurs a recession.
There were certainly some signs of a slowdown in the latest labour market data, published on Tuesday – but with pay growing briskly, it was hard to detect a significant shift. Average regular pay increased at a healthy 5.2% clip in the three months to October, according to the Office for National Statistics (ONS) – up from 4.4% in the previous three-month period. Including bonuses, the figure was also 5.2%.
That means real wages – adjusted for CPI inflation, the measure targeted by the Bank of England – also rose, by 3%, putting more money in the public’s pockets in the run-up to Christmas. The strongest annual pay growth was in manufacturing, the ONS said, at 6% – perhaps a sign that skilled workers in this key sector are in particular demand.
If there were any lingering hope that the Bank’s monetary policy committee might deliver a pre-Christmas interest rate cut on Thursday, when they meet for the last time in 2024, the pay data must have extinguished it. They will fret that such strong wage growth will put a floor under prices, with inflation already expected to continue ticking up in the coming months.
