Wages continued to grow at one of the fastest paces on record in the three months to September, underlining that inflation in the UK will take time to return to the Bank of England’s 2 per cent target.
Regular pay excluding bonuses increased 7.7 per cent, down slightly from the 7.8 per cent growth in the previous three months, according to the Office for National Statistics (ONS).
The figure was in line with analysts’ expectations. It is also the third month in a row that pay has risen faster than inflation, meaning that real wages expanded 1.3 per cent over the past quarter. However, real pay still has some way to go to recover fully from the near two-year long cost of living crisis. Including bonuses, wages climbed 7.9 per cent, well above forecasts for 7.3 per cent growth.
Darren Morgan, ONS director of economic statistics, said: “Our labour market figures show a largely unchanged picture, with the proportions of people who are employed, unemployed or who are neither working nor looking for a job all little changed on the previous quarter.
“With inflation easing in the latest quarter, real pay is now growing at its fastest rate for two years.”
Low response rates to the ONS’s labour market survey have raised doubts over whether it is an accurate reflection of the employment and pay situation in the UK. It has suspended the publication of its usual data and instead used alternative sources of information, such as benefit claimants and HM Revenue & Customs payroll numbers, to generate an unemployment estimate of 4.2 per cent, unchanged compared with the previous quarter.
The statistics agency said that it would resume publishing its usual labour force data in December and that it would have its revamped survey operational next spring.
The absence of robust ONS data has posed challenges for the Bank of England, which is trying to shepherd inflation back to the 2 per cent target, partly by curbing wage growth and demand for workers. The central bank has turned to other pieces of data to understand how the workforce is holding up amid higher interest rates.
The UK base rate has been increased at the quickest pace since the 1980s to 5.25 per cent, a 15-year high, in order to curb inflation. New ONS figures tomorrow are expected to show that inflation dropped to 4.8 per cent in October, its lowest level in two years.
Vacancies fell 58,000 to 957,000 in the three months to October and now are far below their peak of over 1 million.
Pay growth has been pushed up to historic highs by workers demanding better compensation to offset the impact of rising prices over the past two years. A shortage of skilled workers has also led businesses to raise starting pay to attract new staff.