Cost of living squeeze eases as UK regular pay rises faster than inflation – business live | Business

There are signs of “cooling labour demand” in today’s employmenr report, says Yael Selfin, Chief Economist at KPMG UK.

“The latest data indicates that some of the sharpest falls in vacancies have been in sectors which reported persistent skill shortages, including IT and finance. This may signal that the battle for talent has run its course. The overall number of vacancies in September was 314,000 (24%) down since the peak in the middle of last year.

“While the overall momentum of the economy is weak, the expected easing of inflation, coupled with earlier pay awards and the increase in the National Living Wage, should provide further improvements in consumers’ purchasing power and help alleviate the pressure on households.”

The number of people on company payrolls may have peaked this summer, as the rise in interest rates cools the economy.

The Office for National Statistics reports that payrolled employment is estimated to have fallen by 11,000 in September, following a decrease of 8,000 in August.

That left around 30.123m people on company payrolls last month – a rise of 1.2% in the last year, and 1.1m more than in February 2020.

Today’s jobs report also shows a fall in vacancies across UK firms – a sign that demand for labour is cooling.

There were 988,000 vacancies in July to September, the ONS reports, which is a fall of 43,000 compared with April to June.

The ONS says:

• Vacancy numbers fell on the quarter for the 15th consecutive period in July to September 2023, down by 4.2% since April to June 2023 with vacancies falling in 14 of the 18 industry sectors.

• In July to September 2023, total vacancies were down by 256,000 from the level of a year ago, although they remained 187,000 above their pre-coronavirus (COVID-19) pandemic January to March 2020 levels.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

UK regular pay is rising faster than inflation for the first time in almost two years this summer, bringing some relief in the cost of living squeeze.

Regular real pay (adjusted for inflation) rose by 0.7%, year-on-year, in the June-August quarter, new figures from the Office for National Statistics shows.

Regular pay was up by 7.8% in the quarter, the same as last month, but real pay has turned positive, thanks to the fall in inflation last summer.

Real regular pay in the previous period, May-July, has been revised up to 0.1% growth, from an initial reading of 0% – the first positive reading since October 2021.

Total pay (including bonuses) rose by 8.1% in June to August 2023, lifted by payments to NHS and civil service staff this summer (although that’s down from 8.5% in May-July).

Rising wages are clearly a boost to struggling households, after a two-year cost of living squeeze. But it may encourage the Bank of England to keep interest rates high. Yesterday, the BoE’s chief economist, Huw Pill, singled out wage rises as an ‘outlier’ that could indicate persistent inflation pressures.

In its latest healthcheck on the UK jobs market, the ONS also reports that public sector pay growth was the faster in over 20 years, but still lagged the private sector.

Here’s the details:

• Annual average regular pay growth for the public sector was 6.8% in June to August 2023 and is the highest regular annual growth rate since comparable records began in 2001; for the private sector this was 8.0% and among the largest annual growth rates seen outside of the coronavirus (COVID-19) pandemic period.

• The finance and business services sector saw the largest annual regular growth rate at 9.6%, followed by the manufacturing sector at 8.0%; this is one of the highest annual regular growth rates for the manufacturing sector since comparable records began in 2001.

Some of the numbers we’d normally get today, including the jobless rate, has been delayed by a week, though. Data from the ONS’ Labour Force Survey (LFS), used to calculate Britain’s unemployment rate, has been pushed back to next Tuesday (October 24th), due to falling response rates to the LFS survey.

But there are worrying signals from the economy this morning, with engineering firm Rolls-Royce confirming that it plans to cut up to 2,500 jobs across its business.

The agenda

• 7am BST: UK earnings and employment data

• 10am BST: ZEW eurozone economic sentiment index

• 10.15am BST: Treasury Committee inquiry hearing into sexism and misogyny in the City

• 1.30pm BST: US retail sales for September

• 3pm BST: NAHB survey of US housing market