Pay grows at slowest rate for almost two years (2024)

ByNick Edser,Business reporter, BBC News

Pay grows at slowest rate for almost two years (1)Pay grows at slowest rate for almost two years (2)Getty Images

Pay is rising at its slowest rate in almost two years as the job market continues to cool.

Wages grew at an annual pace of 5.7% in the three months to May, but they are still outpacing rising prices.

The number of job vacancies has fallen while the unemployment rate remained at 4.4% in the three months to May, the Office for National Statistics (ONS) said.

Economists are debating whether the numbers will encourage the Bank of England to cut interest rates next month, with the decision expected to be very close.

Liz McKeown, ONS director of economic statistics, said that pay growth, "while remaining relatively strong, is showing signs of slowing again".

"However, with inflation falling, in real terms it is at its highest rate in over two and a half years."

After taking the impact of inflation into account, wages were up by 3.2%.

The speed of pay growth is one of the things the Bank of England will consider at its next meeting on 1 August when deciding what to do about interest rates.

The Bank tends to raise interest rates - or keep them high - when it believes inflation or wages are rising too quickly, hoping that pricier debt will slow down price and pay increases.

If wages are growing strongly, this can push up costs for firms, which they may seek to offset by increasing prices to consumers.

Inflation data released on Wednesday showed it was unchanged at 2% - in line with the Bank's target, giving some confidence that rates could be cut.

However, price rises in the services sector, which covers business such as restaurants and hairdressers, remained strong.

Ashely Webb, UK economist at Capital Economics said that, while the slowdown in pay growth was "encouraging", he doubted it would be enough to offset concerns about persistent inflation in services.

"We now expect the Bank to cut interest rates from 5.25% to 5.00% in September instead of August," he said.

Pay grows at slowest rate for almost two years (3)Pay grows at slowest rate for almost two years (4)

Yael Selfin, chief economist at KPMG UK, said the "modest" slowdown in pay growth "offers some good news for those looking for a rate cut in August".

"But with annual pay growth excluding bonuses at 5.7%, the Bank of England may be unwilling to risk an August cut in rates before the labour market has cooled sufficiently,” she added.

Pay growth in the private sector slowed to 5.6% from 5.9% in the previous three months, the ONS said, while it stayed unchanged at 6.4% in the public sector.

Earnings grew fastest in the finance and business services sector, up 6.7%, while the construction sector saw the smallest rise, with an increase of 3.0%.

Ms McKeown said: “We continue to see overall some signs of a cooling in the labour market, with the growth in the number of employees on the payroll weakening over the medium term and unemployment gradually increasing."

Between April and June this year, the number of job vacancies fell by 30,000 on the quarter to 889,000, led by the retail and hospitality sectors.

The number of vacancies has now been falling for two years, but still remains higher than pre-coronavirus pandemic levels.

The rate of people considered "economically inactive" - defined as those aged between 16 to 64 years old not in work or looking for a job - edged lower to 22.1% in the March to May period, the ONS said.

It means about 9.4 million people are classed as "inactive", with the figure about 800,000 higher than before the coronavirus pandemic.

Concerns have been raised over worker shortages affecting the UK economy.

Work and Pensions Secretary Liz Kendall said the new government had been given "a truly dire inheritance".

“Spiralling economic inactivity, rising unemployment and the UK standing alone as the only G7 country where the employment rate is still not back to pre-pandemic levels."

One of the problems the Bank of England and others have had in using the jobs data recently is questions over the reliability of the figures.

The Labour Force Survey conducted by the ONS, which produces the data, has had a smaller number of respondents over the past year than normal.

The ONS has been developing a new version of the survey, but it said on Thursday this was still being worked on and it would report back on progress early next year.

Employment

Pay

Office for National Statistics

Pay grows at slowest rate for almost two years (2024)

FAQs

What is the average wage growth per year? ›

Wages in the United States increased 4.87 percent in April of 2024 over the same month in the previous year. Wage Growth in the United States averaged 6.19 percent from 1960 until 2024, reaching an all time high of 15.28 percent in April of 2021 and a record low of -5.89 percent in April of 2020.

How is wage growth measured? ›

It is constructed using microdata from the Current Population Survey (CPS), and is the median percent change in the hourly wage of individuals observed 12 months apart.

Has wage growth kept up with inflation? ›

Average hourly wage growth has exceeded inflation for 12 straight months, according to new Bureau of Labor Statistics data released this morning. This real (or inflation-adjusted) wage growth is a key indicator of how well the average worker's wage can improve their standard of living.

Are real wages up? ›

Through May 2024, real wages are up 0.5 percent year over year. While real wage growth has turned slightly positive in recent months, the level of real wages is still below where they were at the onset of the inflation surge that we began to see in the first quarter of 2021.

What is good salary growth? ›

It's always a good idea to ask for anywhere from 10% to 20% higher than what you're making right now. You may be able to ask for more based on your performance, length of time with the company, and other factors. Make sure you come prepared when you negotiate your raise and be confident.

What is a realistic salary growth? ›

Establish your target salary

Make sure to research the average salary for people in your position and industry with the same level of experience. Then, come up with a figure to give your manager when they ask. Typically, it's appropriate to ask for a raise of 10-20% more than what you're currently making.

What does a slow wage growth mean? ›

An increase in wage growth implies price inflation in the economy while a low wage growth indicates deflation that needs artificial interferences such as through fiscal policies by federal/state government.

How to calculate real wage growth? ›

How do you calculate real wage? To calculate the real wage for Year 2, you multiply the nominal wage (Year 1) by the ratio of the CPI (Year 2) over the CPI (Year 1). Another way of interpreting the formula of real wage is Real Wage = (Old Wage * New CPI) / Old CPI.

How much is a salary increase per year? ›

What is the appropriate salary raise in 2024? Most companies have budgeted for 3% annual pay raises over the last decade, and most information suggests this trend will continue. This is true for salaried, hourly and executive worker categories.

What is the meaning of wage growth? ›

Wage growth (real wage growth) is a rise of wage adjusted for inflations, often expressed in percentage.

What is the average salary growth over lifetime? ›

According to the U.S. Bureau of Labor Statistics, individuals with a high school diploma earn an average of approximately $1.3 million over their lifetime. Those with a bachelor's degree earn a significant increase, with average lifetime earnings of about $2.3 million.

What is the wage growth rate in 2024? ›

Wages and salaries increased 5.0 percent for the 12-month period ending in March 2024 and increased 4.7 percent a year ago.

What was the average salary in 1970? ›

YearPeriodIncome
1970Annual$4,810
1971Annual$102,428,432,000
1971Annual$5,034
1972Annual$112,265,074,000
95 more rows

What is the real average hourly earnings in the US? ›

US Real Average Hourly Earnings is at a current level of 11.14, up from 11.09 last month and up from 11.06 one year ago. This is a change of 0.45% from last month and 0.72% from one year ago.

What is the average real weekly wage? ›

US Real Average Weekly Earnings is at a current level of 383.49, up from 382.18 last month and up from 381.34 one year ago. This is a change of 0.34% from last month and 0.56% from one year ago. US Real Average Weekly Earnings are the weekly earnings of US employees, adjusted for inflation.

What percentage of Americans make $75,000 a year? ›

Percentage distribution of household income in the United States in 2022
Annual household income in U.S. dollarsPercentage of U.S. households
35,000 to 49,99910.6%
50,000 to 74,99916.2%
75,000 to 99,99912.3%
100,000 to 149,99916.4%
5 more rows
Jul 5, 2024

How much do wages grow with age? ›

In 2022, the typical worker age 65 or older earned $22 per hour, up from $13 in 1987. Earnings for younger workers haven't grown as much. As a result, the wage gap between older workers and those ages 25 to 64 has narrowed significantly. They're working more hours, on average, than in previous decades.

Is 40K a year good? ›

Is $40K a Good Salary? Earning more than the average worker is one way to determine whether a salary is “good.” With that in mind, how does a $40,000 salary stack up? As of 2024, it falls below the average annual salary in the U.S., which, according to the Bureau of Labor Statistics (BLS), is $59,228.

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