Glimmer of hope? UK wage growth has beaten expectations (but is still well below inflation)

Emma Haslett
Follow Emma
Christmas Shoppers Hunt For Last Minute Gifts
Wage growth has now fallen for three months in a row. (Source: Getty)

The pound nudged higher this morning after official figures showed UK wage growth edged above economists' expectations in the period between March and May.

The pound nosed higher against the dollar, rising a meagre 0.05 per cent to $1.2854, from a low of $1.2813 after figures by the Office for National Statistics (ONS) showed excluding bonuses, average weekly earnings rose two per cent during the quarter, compared with forecasts of 1.9 per cent.

Meanwhile, including bonuses, weekly earnings rose 1.8 per cent. That figure was in line with expectations, but down from 2.1 per cent during the previous quarter.

However, both figures are still well below UK inflation, currently at a four-year high of 2.9 per cent, meaning workers are continuing to experience a real-terms fall in wages. Adjusted for inflation, the ONS said wages contracted 0.5 per cent between March and May.

Read more: Here's why football's prune juice era may finally be over

The figures also showed the UK's unemployment rate fell to 4.5 per cent during the period, beating expectations (and last month's figure) of 4.6 per cent.

Meanwhile, the UK's claimant count fell by 6,000, compared with expectations of 10,000, while the number of people in work rose by 175,000 compared with the period between December and February.

"The squeeze on household finances continues, with wages growing by less than inflation for a third consecutive month," said Ben Brettell, a senior economist at Hargreaves Lansdown.

"Shrinking real pay doesn't bode well for economic growth – the UK economy is heavily reliant on the consumer and falling real incomes should eventually translate into lower retail sales.

"The UK labour market is becoming increasingly difficult to interpret. Conventional economic theory suggests that low unemployment should ultimately lead to upward pressure on wages – but there has been scant evidence of this during the latest squeeze on household finances. Perhaps workers simply don’t have the bargaining power they once did."

Read more: UK growth edged higher in the second quarter - but only just

Related articles