Wage growth rises as UK firms start cutting jobs at fastest rate in four years
UK average earnings have risen for the first time in over a year but the jobs market has cooled following the Government’s Budget.
UK average wages rose by 5.2% in the three months to October, the latest data from the Office for National Statistics (ONS) reveals.
Wages including and excluding bonuses were up 0.3% from 4.9% from the three months before.
Meanwhile, annual average earnings were up 4.4% from the year before, the ONS said.
The latest data means wages in the three months to October are outstripping inflation, which currently sits at 2.3%.
However, it comes after separate data revealed yesterday UK companies have started cutting jobs at the fastest rate in almost four years following the Government’s Budget.
Liz McKeown, director of economic statistics at the ONS, said: “After slowing steadily over a year, growth in pay excluding bonuses increased slightly in the latest period, driven by stronger growth in private sector pay.
“Pay growth including bonuses increased by more, but this reflects previous figures being affected by the one-off payments made to some public sector employees.”
But separate data published today by the ONS estimated the number of people in the UK on payrolls fell by 35,000 to 30.4million between October and November. This data is subject to revision.
The ONS added the number of job vacancies across the UK was 818,000 between September and November, a fall of 31,000.
Liz McKeown, from the ONS, added: “The number of people on payrolls grew slightly in October, but we have seen annual growth rates continue to slow, showing a consistent trend with out latest jobs data from employers.
“The number of job vacancies has also fallen again, though the total remains a little above where it was before the pandemic.”
Today’s data comes as the private sector cut jobs at the fastest rate for nearly four years in December.
The latest S&P Global Flash UK Purchasing Managers’ Index (PMI) found companies reported the sharpest fall in the number of workers since January 2021, during the coronavirus pandemic.
The drop-off was blamed on a combination of softer demand for roles, rising employment costs and squeezed margins for companies.
It comes after the Government Budget hiked employers National Insurance Contributions (NICs).
Fears have been raised the hike in contributions on top of a minimum wage rise next year will lead to workers being laid off or wages stagnating as businesses absorb the added costs.
Liz Kendall, work and pensions secretary, said: “Today’s figures are a stark reminder of the work that needs to be done.
“To get Britain growing again, we need to get Britain working again – so people have good jobs which pay decent wages and offer the chance to progress.”
What it means for your money
Growing wages are good news for workers as it means they are getting more in their pay packets each month.
This, in turn, is good news for the government as it means more people are pumping money into the economy.
This leads to a rise in Gross Domestic Product (GDP), which is a sign an economy is healthy and doing well.
It also means the government has more money to spend on public services like schools, hospitals and libraries which benefits everyone.
Sarah Coles, personal finance expert at Hargreaves Lansdown, said: “Wages are rising even faster than a month ago – and well ahead of inflation, so we feel richer with each passing month.
“Measures in the Budget should keep this on track for a while longer, given the public sector wage rises and minimum wage hikes on the cards.”
However, the latest data reveals that job vacancies are up and the number of workers on payrolls is down in a sign businesses are holding back from employing new staff or letting them go amidst the rise in employer NICs.
The Confederation of British Industry’s own survey found that half of businesses had said they would have to cut jobs to afford the £25billion tax raid.
A number of businesses have slammed the move by the Chancellor Rachel Reeves in October including Dyson and Primark.
Meanwhile, the Governor of the Bank of England (BoE) Andrew Bailey told MPs last month the Budget risked job losses and interest rates staying higher for longer.
Novo Constare, chief executive officer and co-founder of Indeed Flex, said: “The UK labour market showed further signs of a potential slowdown in Budget month, underscoring the immediate fallout from the Chancellor’s tax announcements.
“Job vacancies have continued to decline, while the number of unemployed people per vacancy has also seen a small increase, as businesses adjust to rising costs and economic uncertainty.
“Both businesses and households have adopted a more cautious stance, with concerns about tax hikes shaping their decisions even before the Budget was announced.”
The data today comes as ratesetters at the BoE will announce the next base rate decision on Thursday.
The base rate currently sits at 4.75% after falling from 5.25%, with four rate cuts expected next year.
However, today’s data on wages growing, which fuels inflation, could give the central bank more reason to keep rates on hold this week, which it is widely expected to do.
Why does inflation matter?
INFLATION is a measure of the cost of living. It looks at how much the price of goods, such as food or televisions, and services, such as haircuts or train tickets, has changed over time.
Usually people measure inflation by comparing the cost of things today with how much they cost a year ago. The average increase in prices is known as the inflation rate.
The government sets an inflation target of 2%.
If inflation is too high or it moves around a lot, the Bank of England says it is hard for businesses to set the right prices and for people to plan their spending.
High inflation rates also means people are having to spend more, while savings are likely to be eroded as the cost of goods is more than the interest we’re earning.
Low inflation, on the other hand, means lower prices and a greater likelihood of interest rates on savings beating the inflation rate.
But if inflation is too low some people may put off spending because they expect prices to fall. And if everybody reduced their spending then companies could fail and people might lose their jobs.
See our UK inflation guide and our Is low inflation good? guide for more information.
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