15 August 2023
If you are covering the latest UK labour market statistics, please see the following comment from Richard Carter, head of fixed interest research at Quilter Cheviot:
“While it is premature to call the beginning of the end of the UK’s cost-of-living crisis, the pressures are showing signs of easing. On the eve of an inflation print that is expected to reveal a marked fall, this morning’s labour market statistics show wages might be growing faster than prices for the first time in almost two years.
“Wages have been rising consistently in an attempt to keep up with inflation, and employee regular pay (excluding bonuses) reached 7.8% in April to June 2023, the highest regular annual growth rate seen since records began in 2001. Average total pay (including bonuses) rose to 8.2%, though this growth rate was affected by NHS one-off bonus payments made in June. While wage growth tends to be a lagging indicator and we may therefore begin to see a slowdown in the coming months, for now, despite inflation falling, the increase continues.
“The UK labour market remains relatively tight, as the CIPD’s report this week showed increased employer dependency on counter-offers in a bid to persuade staff with job offers elsewhere to stay put. However, this morning’s jobs data reveal the employment rate saw a slight downtick of 0.1 percentage points lower than January to March 2023, estimated at 75.7% in April to June 2023. Meanwhile, the unemployment rate increased by 0.3 percentage points on the quarter to 4.2%, though the rate of economic inactivity continued to fall, dropping by 0.1 percentage points to 20.9% in April to June 2023.
“The Bank of England will be studying this week’s data carefully, but even if inflation falls as expected in tomorrow’s CPI print following a drop in energy prices, the inflationary pressure of still rising wage growth means the Bank is unlikely to put a halt on further rate rises just yet. What’s more, even if inflation does come in lower than wage growth tomorrow, very few people will feel any real benefit. Rising mortgage rates and high everyday costs continue to put a strain on personal finances, particularly as lower inflation will take some time to feed through to the prices people are paying.”
