UK regular pay growth slows for the first time since January

Growth in British workers’ regular pay – which is being watched closely by the Bank of England – slowed from a previous record high and job vacancies also dropped, official figures showed in a sign that the labour market is losing momentum.

British average earnings, excluding bonuses, were 7.8 per cent higher than a year earlier during the three months to the end of August, down from an upwardly revised 7.9 per cent in the three months to July, the first such fall since January.

Average earnings are being monitored by the Bank of England as it considers whether to resume raising interest rates to counter the risks from still high inflation.

The latest reading was in line with expectations from economists polled by Reuters, but sterling fell slightly against the US dollar after the data.

Total pay – a more volatile measure which includes one-off bonuses – was 8.1 per cent higher in the three months to August than a year earlier.

However, with consumer price inflation of 6.7 per cent in August, the real-terms increase in pay was far smaller.

Regular pay, adjusted for CPI inflation, grew by an annual 0.7 per cent in the three months to August.

Bank of England Chief Economist Huw Pill said on Monday that fast rates of nominal pay growth stood at odds with most other labour market measures, which have pointed to a slowing economy.

The number of job vacancies in the three months to September was 988,000, down from 998,000 in the three months to August.

Provisional employer payroll data showed there were 11,000 fewer people in employment in September compared with August.

Unemployment figures and other related labour market data will not be published until Oct. 24, after the ONS said on Friday it needed more time to take account of low response rates.

Ashley Webb, an economist with consultancy Capital Economics, said a 15th consecutive fall in job vacancies suggested the tightness of the labour market had eased a bit further although a fuller picture would emerge only when the delayed ONS data is published next week.

“Either way, wage growth has passed its peak. But we suspect it will fall only gradually from here,” Webb said.