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Wage Growth Remains Strong, Despite Rising Unemployment
NIESR
2024.05.16
The annual growth rate of average weekly earnings, including bonuses, was 5.7 per cent in the first quarter of 2024, while pay growth excluding bonuses was 6 per cent. In real terms, economy-wide total pay increased by 1.7 per cent, its highest level since October 2021
These figures indicate that wage growth remains high by historical standards, enabling households to achieve real income gains following a period of purchasing power erosion due to high inflation
We expect wage growth to remain strong in Q2 2024 amidst the minimum wage hike in April and an upward revision to our Q2 GDP forecast, and to gradually slow as the labour market cools in the following months
The persistence of high wage growth together with the minimum wage hike means inflation may be stickier than previously thought, leading the Bank of England to remain cautious with regards to interest rate cuts
Unemployment has risen by 0.5 pp on the quarter, recording 4.3 per cent in Q1 2024, its highest level since July 2023: the largest rises were in the North West and the West Midlands which had already higher levels of unemployment for available vacancies
The vacancy-to-unemployment ratio remains on a downward trend, amidst a rise in unemployment and a gradual fall in labour demand, indicating that the labour market continues to cool