UK Wage Growth Slows Amid Job Market Cool-Off

Recent data indicates a slowdown in wage growth throughout the UK, with signs that the job market is losing momentum.

Within the three-month period ending in October, pay increases, when not accounting for bonuses, declined to a growth rate of 7.3%. Concurrently, the number of job openings decreased.

Despite the deceleration in wage rises, salaries continue to surpass inflation rates, casting doubt on the likelihood of an upcoming reduction in interest rates by the Bank of England.

Statistics revealed a slight decrease in the number of individuals listed on payrolls, along with a discernible drop in job vacancies by about 45,000 from September to November.

"Experiencing the most prolonged period of vacancy declines ever recorded, we're seeing a trend that surpasses even the post-2008 economic slump," mentioned Darren Morgan, an economic statistics director with the Office for National Statistics, the body responsible for publishing these findings. This downturn in job vacancies has persisted for 17 consecutive months.

However, the total job vacancies, numbering around 949,000, are still considerably higher than those before the pandemic, Morgan noted.

With the Bank of England having consistently raised interest rates, inflation has seen a decrease, prompting speculation among financial markets and some economists about a potential cut in interest rates from the current 5.25%.

Although inflation has dipped to 4.6%, it is still more than twice the Bank's aim of 2%. Additionally, wages, excluding bonuses, have increased at a rate surpassing inflation over the three months to October.

Last month, the Bank of England's governor, Andrew Bailey, asserted it was premature to consider rate reductions. Moreover, the Bank is anticipated to maintain interest rates in its forthcoming announcement on Thursday.

Yael Selfin, a chief economist at KPMG UK, remarked, "While labor market momentum is waning, overall conditions remain tight, suggesting the Bank of England should stay cautious as this could impede their fight against inflation, especially if robust wage growth continues influencing domestic price rises."

Wages, Inflation, Interest