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Service Sector Pay Growth Continues to Fall - NIESR
Growth in average weekly earnings continues to ease in line with expectations, recording 5.1 per cent for regular pay in the three months to July 2024, and 4.0 per cent if we include bonuses. Total pay growth is affected by base effects from the one-off public sector bonus payments last year. For the third quarter of this year, we forecast these figures at 4.8 per cent, and 4.0 per cent.
Most notably, growth in services sector wage growth fell faster than expected, recording 3.8 per cent, compared to an average of 5.9 per cent in the first five months of this year. This is positive news for inflation and might provide the Bank of England with increased confidence regarding interest rate cuts.
With inflation falling, annual growth in real regular pay remains strong at 1.9 per cent in July (0.8 per cent if we include bonuses), meaning workers will see a continued recovery in their standard of living. However, we expect pay growth to continue gradually slowing as the labour market cools in the coming months.
The vacancy-to-unemployment ratio remains above pre-pandemic levels, although it has fallen in recent months amidst the labour market gradually cooling. The overall fall in this ratio will gradually reduce wage pressure, as companies don’t have to compete as hard to find workers.
Most notably, growth in services sector wage growth fell faster than expected, recording 3.8 per cent, compared to an average of 5.9 per cent in the first five months of this year. This is positive news for inflation and might provide the Bank of England with increased confidence regarding interest rate cuts.
With inflation falling, annual growth in real regular pay remains strong at 1.9 per cent in July (0.8 per cent if we include bonuses), meaning workers will see a continued recovery in their standard of living. However, we expect pay growth to continue gradually slowing as the labour market cools in the coming months.
The vacancy-to-unemployment ratio remains above pre-pandemic levels, although it has fallen in recent months amidst the labour market gradually cooling. The overall fall in this ratio will gradually reduce wage pressure, as companies don’t have to compete as hard to find workers.
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