UK wage growth barely slows, fuelling interest rate path uncertainty
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The pace of UK wage growth eased in September, but not as much as expected, which may reinforce the Bank of England's (BoE) cautious approach to future interest rate cuts.
Average UK weekly earnings, not including bonuses, were 4.8% higher on year over the three months to September, slowing from a 4.9% rise in the previous period. When including bonuses, the figure climbed to 4.3%.
Wage growth excluding bonuses moderated to its slowest pace in over two years, declining from 4.9% in August, according to Liz McKeown, director of economic statistics at the ONS.
“Growth in pay excluding bonuses eased again this month to its lowest rate in over two years,” McKeown said.
“Pay growth including bonuses increased, but for recent periods these figures have been affected by last year’s one-off payments made to public sector workers,” she added.
Earnings growth continues to outstrip inflation, however, as pay increased by 2.7% in the three months to September with Consumer Prices Index (CPI) inflation taken into account.
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The unemployment rate also rose, reaching 4.3%, above the anticipated 4.1%. This was the highest level since the three months to May, although the ONS said the estimate should be treated with caution given ongoing low response rates to its jobs survey.
The ONS figures suggest underlying pressures in the labour market despite recent interventions from the BoE.
The latest wage data comes amid the BoE’s recent decision to cut interest rates for the second time this year, to 4.75%.
In a cautious tone, governor Andrew Bailey warned last week that the BoE would continue to take a measured approach in the coming months, partly due to concerns about the jobs market.
Lindsay James, investment strategist at Quilter Investors, said: “ONS jobs data out this morning provide further evidence that higher interest rates are taking a toll. While the UK labour market is still managing to tick stubbornly along, both the unemployment rate and employee annual wage growth have seen an uptick"
The estimated number of vacancies in the UK in the three months to October was 831,000, which was a decrease of 35,000 from May to July, according to the ONS. It was the lowest number of vacancies since the three months to May 2021.
