Euronews Business delves into the recent decline in the growth of the UK’s average earnings, excluding bonuses, which has fallen to its lowest level since June 2022, during the three months leading up to July.
According to the Office for National Statistics (ONS), the UK’s year-on-year average earnings, excluding bonuses, rose by 5.1% to £647 per week in the three months ending July. While this increase aligned with analysts’ predictions, it represented a decrease from the previous quarter’s 5.4% growth. This change marks the smallest rise since June 2022.
Regular pay, which refers to average earnings excluding bonuses, has experienced a notable shift. A significant factor behind this slowdown is the decline in private sector earnings growth, which dropped from 5.3% in the previous quarter to 4.9% this time. Simultaneously, public sector wages slowed down to 5.7%, down from 6% in the previous three-month period.
The manufacturing sector noted the highest annual regular wage increase during this period, at 5.9%. In contrast, the services sector recorded a 5.1% rise, while the finance and business services sector saw a 5.4% growth in wages in the same timeframe. However, the construction sector lagged with a modest wage growth of 3.9%.
When considering total earnings, which include bonuses, the average weekly earnings increased by 4% to £689 per week for the three months ending July, according to ONS data. This figure fell short of analysts’ expectations of 4.1% and was lower than the previous quarter’s 4.6% growth—marking the lowest level since November 2020.
The decline in total pay reflects a significant lag in wage growth within the public sector, which fell to 0.8% in the three months to July from 1.9% previously. The private sector also experienced slower earnings growth, decreasing to 4.8% from 5.1% in the earlier period. Furthermore, one-time payments made to Civil Service and National Health Service (NHS) staff in June and July of the previous year also contributed to this drop.
Alice Haine, a personal finance analyst at Bestinvest, shared insights via email: “As pay growth slows, it may enhance the probability of the Bank of England proceeding with another rate cut this year.” She added, “While economists don’t anticipate an immediate rate cut, the Bank of England remains cautious about adjusting rates ‘too much or too quickly.’ However, a timetable for such changes is never fixed.”
Despite the easing upward pressure on wages, regular salaries in real terms increased by 2.2%, and total pay rose by 1.1% after accounting for inflation. This means that incomes are still outpacing price increases, allowing households to feel somewhat relieved following challenging economic times. Nevertheless, Haine advises a cautious approach toward spending.
UK Unemployment Hits Lowest Point Since January
In addition to earnings data, the UK’s unemployment rate for the three months ending July has also been reported, decreasing to 4.1% from 4.2% in the prior period. This decline aligns with analyst forecasts and represents the lowest unemployment rate since January.
The number of unemployed individuals declined to 1.44 million, a reduction of 74,000. Conversely, employment figures showed an increase, with 265,000 more people entering jobs, bringing the total to 33.23 million—the highest rise in employment seen in over a year and a half, driven largely by growth in full-time roles.
Haine further commented, “The UK’s economic inactivity rate remains elevated at 21.9%. This means that over one-fifth of working-age adults are either outside the labor market or not actively searching for employment, often due to long-term health issues, educational pursuits, or choices like early retirement.”
She concluded, “As the winter months approach, job security is likely to loom as a worry, highlighting the importance of managing personal finances to prepare for unexpected circumstances, such as job loss. Recommendations include establishing a solid emergency fund, reducing debt, and considering income protection measures for those without backup financial options.”
Photo credit & article inspired by: Euronews
