Wage growth has fallen to its lowest level in more than two years while Britain’s jobless rate jumped by more than expected, according to official figures.
The Office for National Statistics (ONS) said average regular earnings growth eased back to 4.8% in the three months to September, down from 4.9% in the previous three months.
This marked the lowest level since the three months to June 2022.
Earnings growth continues to outstrip inflation, however, as pay increased by 2.7% in the three months to September with Consumer Prices Index (CPI) inflation taken into account.
The ONS said the rate of UK unemployment rose to 4.3% in the three months to September, up from 4% in the previous three months and far higher than the 4.1% pencilled in by most economists.
This was the highest level since the three months to May, although the ONS said the estimate should be treated with caution given ongoing low response rates to its jobs survey.
More timely data showed the number of UK workers on payrolls also fell, down by 5,000 between September and October to 30.4 million, the figures showed.
Vacancies dropped yet again, down by 35,000 to 831,000 in the three months to October.
The slowdown in wages growth has helped pave the way for interest rate cuts from the Bank of England, which last week delivered a reduction to 4.75% from 5% – the second decrease this year.
But it comes amid mounting warnings from business giants over the impact of the Chancellor’s Budget move to increase employers’ national insurance contributions on jobs and prices for consumers.
The likes of Asda, Sainsbury’s and Marks & Spencer have all revealed they will face a major cost hike as a result of the measure and signalled this could also result in some pressure on prices for shoppers.
Experts have warned the tax hike is set to push up inflation.
Gora Suri, economist at PwC UK, said there will also likely be pressure on wages.
“If businesses pass some of this onto workers, this could weigh on pay growth in the short to medium term,” he said.
ONS data showed a big fall in the inactivity rate for those aged between 16 and 64 not actively looking for work – down to 21.8% in the three months to September from 22.2% in the previous quarter.
Experts said the Bank of England was unlikely to step up the pace of interest rate cuts after the latest jobs data.
Matt Swannell, chief economic adviser to the EY ITEM Club, said: “Though pay growth is now far below the highs seen in 2023, it is still running well above the 3% to 3.5% range the Bank of England would consider consistent with inflation returning to the 2% target on a sustained basis.”
He added: “Today’s labour market data will do nothing to dissuade the Bank from its gradual approach to lowering Bank Rate.”
The Bank’s own chief economist, Huw Pill, also said on Tuesday that the latest ONS data showed wage growth “remains quite sticky at elevated levels”.
At a conference organised by UBS, he said the wage growth level was “hard to reconcile with the UK inflation target”.
