UK wages have grown by 3.1%, which is the fastest they have risen in almost a decade. The data from the Office for National Statistics (ONS) showed the growth in the three months to August, where inflation for the same period was 2.5%.
This data also shows unemployment fell by 47,000 to 1.36 million in those three months, but the jobless rate remained stable at 4%.
Although impressive, before the global financial crisis in 2007, the average wage growth was 4%. It is widely reported that these latest wage growths are unlikely to be maintained, with the Bank of England saying in August that it expected pay to be growing at a rate of 2.5% a year by the end of 2018, climbing to 3.5% by the end of 2020.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics supported this lack of trust in the maintenance of high wage growth by saying:
“The recent pick-up in wage growth has been driven partly by the loosening of the public-sector pay cap for some workers. For instance, most NHS workers received a pay rise of at least 3% in July.
“But the government still is keeping a tight lid on pay rises in other departments, while this year’s increase in NHS pay is the best in a three-year deal. Public sector pay growth, therefore, likely has reached a ceiling.
“The recent upturn in wage growth also has been flattered by the recent rebound in average hours.”
Suren Thiru, head of economics at the British Chambers of Commerce also doesn’t expect the trend to continue:
“While wage growth increased again, the pace at which pay growth is exceeding price growth remains well below the historic average, meaning the current squeeze on spending power is unlikely to ease.
“Achieving a meaningful improvement in wage growth will be an uphill struggle unless the underlying issues that continue to limit pay settlements are tackled – notably sluggish productivity, considerable underemployment and high upfront costs for businesses.”