UK employees see fastest growth in basic wage in almost a decade

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(qlmbusinessnews.com via uk.reuters.com — Tue, 16th Oct, 2018) London, UK —

LONDON, Oct 16 (Reuters) – Workers in Britain saw their basic wages rise at the fastest pace in nearly a decade over the summer months, backing up the Bank of England’s view that a long period of weak pay rises is ending.

Earnings, excluding bonuses, rose by an annual 3.1 percent in the three months to August, the Office for National Statistics said on Tuesday.

That was higher than all forecasts in a Reuters poll of economists.

Including bonuses, total earnings rose by 2.7 percent in the period, slightly above the poll’s median forecast of 2.6 percent.

The Bank of England’s chief economist, Andy Haldane, said last week that he saw signs of a “new dawn” for British wage growth.

Economists have been puzzled why wages were growing so slowly even as unemployment fell sharply.

Pay growth for Britain’s workers slowed to as low as 0.5 percent in 2014. Despite the recent improvement it remains stuck below the 4 percent increases that were the norm before the global financial crisis.

The unemployment rate held at its four-decade low of 4.0 percent in the three months to August, the ONS said.

But the number of people in work fell by 5,000, the first fall in nearly a year. The Reuters poll of economists had pointed to a rise of 11,000.

British households – whose spending is the main driver of the country’s economy – have struggled for much of the past decade as their wages grew more slowly than inflation.

Data due on Wednesday is expected to show Britain’s consumer price inflation stood at 2.6 percent in September, below a peak of 3.1 percent in November last year but still offering only modest improvement in spending power for workers.

The BoE said in August that it expected growth in total pay of 2.5 percent a year by the end of 2018, rising to 3.5 percent by the end of 2020, enough to justify the central bank’s plan to gradually raise interest rates over the period.

Reporting by William Schomberg and David Milliken