- Pay growth eased to 4.5 per cent between September and November.
- Private sector wage rises slowed to a five-year low.
- Payroll employment fell by 135,000 despite the Christmas hiring period
Wage growth in the UK lost some momentum in the three months from September to November, with average pay rising 4.5 per cent, according to figures released by the Office for National Statistics. This marked a slight slowdown from the previous period, when wages excluding bonuses were growing at 4.6 per cent.
The easing was driven largely by the private sector. Pay growth for employees working for private businesses fell to 3.6 per cent, the weakest pace in five years. In contrast, public sector wages rose sharply, up 7.9 per cent over the same period. The ONS noted that this jump likely reflects the timing of pay awards, many of which were brought forward compared with last year.
Liz McKeown, director of economic statistics at the ONS, reportedly said private sector wage growth had slowed to its lowest rate in five years, while public sector pay remained elevated due to earlier settlements.
Jobs thin out ahead of the festive rush
Alongside slower pay growth, the labour market showed further signs of strain. The number of people on company payrolls fell by 135,000 in the three months to November. Retail and hospitality saw some of the sharpest declines, even as businesses usually step up hiring ahead of Christmas.
Unemployment held steady at 5.1 per cent, the highest level since early 2021, when the economy was still dealing with the effects of Covid and lockdowns. For many households, this combination of fewer jobs and slower wage growth could mean tighter budgets going into the new year.
Economists are watching wage data closely because of its link to inflation. When pay rises quickly, consumers tend to spend more, pushing prices higher. Slower wage growth can ease that pressure.
Sanjay Raja, chief UK economist at Deutsche Bank, reportedly said easing pay growth was encouraging for the outlook on interest rates, as quoted in a news report. He suggested it could make policymakers more comfortable about inflation moving back towards the 2 per cent target.
Inflation stood at 3.2 per cent in November, down from 3.4 per cent a month earlier. Since August 2024, the Bank of England has cut interest rates six times, most recently in December, when borrowing costs were reduced from 4 per cent to 3.75 per cent. Many economists expect rates to be held steady when the bank’s rate-setting committee meets in February.
