Average weekly earnings including bonus payments grew by 0.6pc in the three months to the end of July, according to the Office for National Statistics (ONS). Regular pay grew by 0.7pc over the same period, representing the weakest growth since records began in 2001.
While wage growth has bounced back from last month's shock contraction in total earnings, and more strongly than analysts had forecast, the average pay packet is still growing much slower than July's official inflation rate of 1.6pc. The 0.2pc decline in total pay in the three months to June was also revised to 0.1pc.
The ONS said just over two million people were out of work in the quarter to July, 468,000 fewer than a year earlier. This is the largest annual fall in unemployment since 1988.
The decline in unemployment pushed down the jobless rate to 6.2pc in the three months to July. This was the lowest level in almost six years and down from 6.6pc between February and April. In July alone, the jobless rate fell to 5.9pc, down from 6.4pc in April.
The ONS said 30.6m people were now in work, 74,000 more than in the previous quarter. However, analysts highlighted that almost all the rise was due to growth in part-time employment, while the increase in jobs was the smallest quarterly rise in almost a year.
However, the number of people working part-time because they could not find a full time job fell by 66,000 over the quarter, suggesting the increase in part time workers was not due to underemployment.
Mark Carney, the governor of the Bank of England, said last week that he expected pay to start outpacing price rises "around the middle of next year", when unemployment is projected to fall towards 5.5pc.
Economists also expect more robust wage growth in the coming months, as slower jobs growth suggests improved prospects for productivity growth. “Wages remain the missing link in this recovery. But with job vacancies up by 25pc in the last year and unemployment at a six year low we see earnings heading up from here," said Ian Stewart, chief economist at Deloitte.
Others said subdued inflation and the continued weakness in wages meant the Bank of England was still likely to keep interest rates on hold until next year. "The Bank still has time to wait on interest rates given weak wage growth, but not too long as unemployment is falling like a stone," said Rob Wood, chief UK economist at Berenberg Bank.
However, analysts at Citigroup said the increase in jobs continued to be concentrated in sectors with low pay, which dragged down overall wage growth. "We estimate that the number of employees rose 3.9pc year-on-year between May and July in sectors where the typical level of pay is at least 20pc below the average for all sectors: conversely, employment fell slightly (0.1pc y-o-y) in sectors with pay levels that are at least 20pc above the UK average," said Michael Saunders, chief UK economist at Citi.
"In turn, the expansion of low-pay sectors is likely to depress both average earnings growth and productivity growth."
Citi's findings chime with recent comments by Ben Broadbent, the Bank's deputy governor, who said changes to benefit rules had encouraged more people to look for work, but also pushed down average wages.
A continued pattern of weak wage growth forced the Bank to slash its wage forecasts for 2014 in half at the August Inflation Report. Policymakers now expect average earnings to grow by 1.25pc this year.
Data on Tuesday showed inflation, as measured by the consumer prices index, slowed to 1.5pc in August, which is well below the Bank's 2pc target. Some analysts believe inflation will fall to 1pc by the end of the year.
Original Article
Source: telegraph.co.uk/
Author: Szu Ping Chan
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