## UK Witnesses Record Wage Growth Amid Inflation Concerns
In a recent report from the Office for National Statistics (ONS), wages in the United Kingdom have seen a significant increase of 7.8% in the three months leading up to June. This represents the fastest annual rate of wage growth since record keeping began.
The ONS Director of Economic Statistics, Darren Morgan, noted that this wage growth is accompanied by lower inflation, suggesting a recovery in people’s real pay. However, the data also showed a 7.9% rise in UK consumer prices in June compared to the same period last year.
## Bank of England Concerned Over Inflation Fuelling Wage Growth
The trend of strong wage growth has raised concerns among policymakers at the Bank of England. They believe that this trend could fuel inflation. The central bank has recently implemented its 14th consecutive interest rate hike in an attempt to control rising prices, taking its benchmark rate to 5.25%, the highest level since February 2008.
Ruth Gregory, Deputy Chief UK Economist at Capital Economics, supports the stance of the Bank of England. She predicts the bank will deliver one more quarter-percentage-point rate hike before concluding its tightening cycle.
## Signs of a Cooling Labor Market
Despite the wage growth, the ONS data revealed signs of a cooling labor market, a development that policymakers will welcome. The unemployment rate rose slightly to 4.2% in the quarter to June, although it remains relatively low by historical standards.
Job vacancies fell by 66,000 in the three months to July compared with the February-to-April quarter, but still remain above 1 million. According to Darren Morgan, job vacancies have now fallen over a quarter of a million since last year, but they remain significantly above pre-Covid levels.
## Companies Face Pressure to Increase Wages
Amid these developments, UK companies are feeling the pressure to increase wages to remain competitive in the labor market. Over the past year, 40% of employers have made a counteroffer to retain employees who have received other job offers, according to a survey published by the Chartered Institute of Personnel and Development. The survey found 38% of these employers matched the salary of the new job and 40% offered even higher pay.
## Wage Growth Outstrips Inflation
For the first time in over a year, private sector pay growth is outpacing inflation. Average regular pay growth, excluding bonuses, increased to 8.2% in the April-to-June quarter compared to the same period in 2022. This measure has been closely monitored by the Bank of England as an indicator of domestic inflationary pressures.
Despite these promising figures, the ONS noted that the data was affected by one-off bonus payments made to healthcare workers. Martin Beck, chief economic adviser to the EY ITEM Club, suggests that there are few signs that a growing slack in the jobs market is restraining pay growth. He predicts another interest rate rise in September is very likely. Official data due Wednesday is expected to show that inflation slowed to 6.8% in July, according to economists polled by Reuters.
Original Story at www.cnn.com – 2023-08-15 10:22:00
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