Wage growth rises for first time in more than a year as firms start cutting jobs

Regular earnings growth jumped to 5.2% in the three months to October, up from 4.9% in the previous three months and the first time it has risen since August last year, official figures show

UK wage growth has seen an increase for the first time in over a year, however, there are indications of a continued slowdown in the jobs market due to increasing uncertainty following recent Budget measures.

Official statistics reveal that regular earnings growth surged to 5.2% in the three months leading up to October, a rise from 4.9% in the previous three months and the first increase since August of the previous year.

Earnings growth also surpassed inflation by 3% in the three months leading up to October, taking into account the Consumer Prices Index (CPI) inflation. The Office for National Statistics (ONS) estimates that the number of people on UK payrolls dropped by 35,000 to 30.4 million between October and November, although this is subject to revision.

It further stated that the number of vacancies decreased by 31,000 to 818,000 in the three months leading up to November. The figures showed that the unemployment rate remained steady at 4.3% in the three months leading up to October, although the ONS added a note of caution given changes to the jobs survey.

This comes as concerns grow over the impact on hiring and jobs after the Budget announced significant increases in employers’ national insurance contributions and a minimum wage rise next year. These figures are also under close scrutiny ahead of the Bank of England’s interest rate decision on Thursday, with the uptick in wages reinforcing expectations that policymakers will maintain the base rate at 4.75%.

ONS director of economic statistics, Liz McKeown, remarked: "After slowing steadily for over a year, growth in pay excluding bonuses increased slightly in the latest period, driven by stronger growth in private sector pay."

She continued to highlight payroll trends: "We have seen annual growth rates continue to slow, showing a consistent trend with our latest jobs data from employers."

On job vacancies, McKeown noted: "The number of job vacancies has also fallen again, though the total remains a little above where it was before the pandemic."

Economist Gora Suri from PwC UK weighed in on the earnings growth, indicating ongoing inflation pressures in the economy: "Despite the considerable disinflation we have seen in the UK economy over the last two years, these underlying inflationary pressures remain.

"This means that the Bank of England is highly likely to keep interest rates on hold at its next meeting on Thursday, before resuming rate cuts in the new year."

The recent statistics unveiled regular earnings growth in the private sector rising to 5.4% for the three months leading up to October, marking the highest increase since May. Meanwhile, public sector wage expansion was recorded at 4.3%.

Although earnings growth had been on a steady decline after peaking in August the previous year at a rise of 7.9%, the current uplift signifies better conditions for employees but simultaneously adds strain on businesses which are facing impending hikes to their wage expenditures come next April.

Liberal Democrat Treasury spokeswoman Daisy Cooper said: "Over the Christmas period no one should have to worry about the impact that an impending tax rise may have on their employment.

"The new Government must see sense and realise that their self-defeating hike in national insurance will only make the situation worse for health services and high streets."