News

Wage Growth in the U.K. Moderates

James L. Flint

• October 17, 2023

Overview

In the three months leading up to August, wage growth in the United Kingdom experienced a slight moderation. This easing of pressure on the Bank of England may result in them maintaining interest rates at their current level. According to data from the Office for National Statistics (ONS) published on Tuesday, annual growth in average weekly earnings, excluding bonuses, stood at 7.8% for June to August. This figure aligns with the consensus among economists polled by The Wall Street Journal.

Details

The ONS reported that the 7.8% growth rate is slightly lower than the revised figure of 7.9% recorded for the three months to July. The July growth rate was one of the highest since records began in 2001. However, this marked the first decline in wage growth since January, indicating that the U.K.'s labor market may be entering a cooling phase.

Furthermore, earnings increases have outpaced annual consumer price rises, with inflation easing to 6.7% in August.

When including bonuses, wage growth slowed even more sharply to 8.1% in the three months to August, down from 8.5% recorded for May-July.

The release of certain labor-market data, including the headline unemployment rate, has been delayed and is now set to be published in a week's time.

Conclusion

With wage growth moderating and inflation easing, the Bank of England may opt to maintain its current interest rates. This reflects a potential cooling of the labor market in the U.K.