Guernsey Press

Bank set to hold rates as wage growth rises for first time in more than a year

Official figures showed regular earnings growth rose by more than expected, to 5.2% in the three months to October.

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Wage growth has jumped higher for the first time in more than a year, reinforcing expectations that the Bank of England will hold interest rates later this week.

Official figures showed regular earnings growth rose by more than expected, to 5.2% in the three months to October, up from a revised 4.9% in the previous three months and the first time it has risen since August last year.

Earnings growth also outstripped inflation by 3% in the three months to October, with Consumer Prices Index (CPI) inflation taken into account, according to the data from the Office for National Statistics (ONS).

Line graph comparing pay growth with CPI inflation from October 2022 to October 2024
(PA Graphics)

Public sector pay growth stood at 4.3% in the latest period.

Pay growth is watched closely by rate-setters at the Bank for signs of inflation pressures in the economy.

Experts said the pick-up in wage growth cements expectations that policymakers will keep the base rate on hold at 4.75% when they next decide on Thursday, having already cut rates twice this year as inflation has eased back.

Gora Suri, economist at PwC UK, said the rise in earnings growth shows that inflation pressures remain in the economy.

He said: “Despite the considerable disinflation we have seen in the UK economy over the last two years, these underlying inflationary pressures remain.

Line graph showing UK unemployment rate from 2018 to 2024
(PA Graphics)

The pound edged higher as the figures signalled that a year-end rate cut was unlikely, up 0.3% at 1.21 euros and 0.1% higher at 1.27 US dollars.

There were also further signs of a weakening jobs market, with the ONS estimating the number of people on UK payrolls fell by 35,000 to 30.4 million during November, although this is subject to revision.

It added that the number of vacancies fell by 31,000 to 818,000 in the three months to November.

It comes as there are fears of an impact on hiring and jobs after the Budget announced steep increases in employers’ national insurance contributions and a minimum wage rise next year.

Figures on Monday showed that private sector employment fell at the fastest rate in nearly four years in early December, as firms continued reacting to the autumn Budget announcements.

Activity across the UK’s private sector grew slightly in the first weeks of December, but more notable was a “marked pullback in hiring”, according to the S&P Global flash UK composite purchasing managers’ index.

Regular earnings growth, excluding bonuses, had been falling steadily since reaching a peak in August last year, when regular wages rose by 7.9%.

Line graph showing the number of people in the UK workforce inactive due to long-term sickness from 2018 to August-October 2024
(PA Graphics)

Liberal Democrat Treasury spokeswoman Daisy Cooper said: “Over the Christmas period no-one should have to worry about the impact that an impending tax rise may have on their employment.

“The new Government must see sense and realise that their self-defeating hike in national insurance will only make the situation worse for health services and high streets.”

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