Economics – Is pay growth slowing?
14 October 2021ONS data suggests that pay growth on the UK may be slowing slightly.
ONS data suggests that pay growth on the UK may be slowing slightly.
For immediate release
Top-line annual pay growth peaked in June 2021, but slowed slightly in July and August – both public and private sector show this effect.
“Real terms” pay growth has also been eroded by rapidly-strengthening inflation. With all factors accounted for, real wage growth was about 2.5% in the 3 months ending August, compared with 5.3% in the 3 months ending June.
This is still fairly high by historical standards – it is not uncommon for pay in the UK to be flat or even to decline in real terms – but it is somewhat puzzling.
It is not clear why pay might be slowing - demand for labour remains extremely strong in the UK, suggesting that employers will attempt to raise wages rapidly wherever possible.
One reason may be that the England’s first COVID-19 lockdown was wound-up, gradually, from June 2020 at which point business activity resumed and incomes began to rise. Pay levels in July and August 2020 therefore offer increasingly-tough “comparables” for the latest data.
Looking ahead, inflation is expected to pose an increasing challenge, reducing the spending power of working and non-working households. IGD’s ShopperVista data suggests that consumers are once more becoming more downbeat after a brief period of increasing optimism.
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