Real wages have displayed their weakest growth rate in almost a year, despite unemployment falling to a 43-year low.
Average total pay including bonuses grew by 2.4% over the 12 months to the end June, according to the latest figures from the Office for National Statistics (ONS). This is only 0.1% higher than the average inflation increase. When bonuses are excluded, total pay increased by an average of 2.7% year-on-year. These growth rates were lower than analysts expected.
The disappointing pay growth figures potentially come as a surprise, given the ONS found the number of unemployed in the UK has fallen to 1.36 million, or 4%, which represents the lowest level since February 1975.
The number of people in employment rose to 32.39 million, with average weekly pay coming in at £488 excluding bonuses. When bonuses are included, this figure totalled £518.
Ahead of the UK’s deadline to leave the European Union (EU) next March, the number of EU nationals working in the UK dropped by 86,000 to 2.28 million. This represents the largest fall in records since 1997.
The number of people on zero hours contracts also fell to 780,000, down almost 12% in a year.
“Economists are predicting inflation figures tomorrow at 2.5%, so we will have to wait and see whether wages including bonuses have fallen behind inflation again,” Sarah Coles, personal finance analyst at fund broker Hargreaves Lansdown, comments.
“Given that unemployment is so low and vacancies are at their highest level since comparable records began in April 2001 (829,000), we would usually expect faster wage increases. However, higher employment doesn’t appear to be feeding so strikingly into higher wages at the moment.”