UK average earnings grow by 8.1% year-on-year, remaining far above rate setters’ comfort zone

UK earnings (inc. bonuses) grow by 8.1% from a year earlier, compared to last month’s 8.5% figure. But unless wage growth slows markedly soon, borrowing costs look set to remain evaluated throughout 2024.

17 October 2023

Suspiciously the ONS omitted key UK employment (and unemployment) numbers in their data release this morning, citing problems with their data collection – this surely calls into question prior months' numbers but we will have to wait and see.

What they did release showed that UK wage growth, whilst slowing slightly from previous months, was still around historic highs. Wage growth taken as the three-monthly moving average rose 8.1% compared to the same period last year (against expectations of a slightly hotter 8.3% print). This compares to the previous month’s 8.5% rate, so a move in the right direction as far as the Bank of England are concerned. But before we get too excited, this is still a hot number and not falling at the rate that the Bank probably wants or expects. Some of this froth in wage growth will be resultant from the negotiated pay settlements in the public sector so will be seen as a particular one-off. But unless we see marked slowing in the coming months, interest rates will be staying higher throughout next year.