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Living Crisis: UK regular pay rises faster than inflation

According to official figures, average wage growth in the UK rose above inflation in August for the first time in almost two years, easing some of the pressure on workers amid the cost of living crisis.

The Office for National Statistics said annual growth in regular pay, excluding bonuses, was 7.8% in the three months to August, among the fastest growth rates on records dating back to 2001.

After a cooling in the annual inflation rate over recent months, the ONS said this meant regular pay was 0.7% higher on the year. Regular pay in the previous three-month period was revised from an initial reading of zero to 0.1% – the first real-term increase since October 2021.

Economists expect the ONS to say that annual inflation fell slightly to 6.5% in September, from 6.7% in August, when figures are released on Wednesday – still well above the Bank of England’s 2% target.

However, the latest figures from the labour market showed a sharp drop in job vacancies, with a decrease of 43,000 from April to June to just below 1 million. Employer payroll figures from HMRC also showed 11,000 fewer employed people in September compared with August.

Swati Dhingra, an external member of the Bank’s rate-setting monetary policy committee, said there were signs of the jobs market “really loosening” which could lead to weaker wage growth.

Speaking at an event hosted by the Royal Economic Society on Tuesday, she said: “It is hard to imagine where further momentum in wage growth is going to come from.”

With a slowdown in hiring demand as the economy struggles for growth after 14 consecutive rate increases from the central bank, economists expected unemployment to rise and weaker wage growth over the coming months.

Hannah Slaughter, a senior economist at the Resolution Foundation, said: “Following yet another painful inflation squeeze in recent years, pay packets have staged a mini-recovery this year. But with the labour market continuing to cool, this autumn’s big question is how long this recovery will last.”

Official unemployment figures and other jobs market data will be published next week after the ONS said on Friday that it needed more time to take account of low response rates to its main labour force survey.

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