Shock fall in UK wages is first since 2009

Britons suffered the first fall in wages since the recession of 2009 despite a drop in the unemployment rate to 6.4%.

Figures from the Office for National Statistics for the April to June quarter showed that wages, including bonuses, fell by 0.2%. Excluding bonus payments, wages were up by 0.6%, the slowest growth rate since 2001, when records began.

The number of people in work rose 167,000 on the previous three months with 132,000 fewer people out of work.

The ONS said the drop in wages was mainly due to a spike last year, when some employers that usually pay bonuses in March shifted them to April. The implication is that the comparison with last year is a statistical blip that should drop out of the wages figures next month when April is no longer included.

Recent pay surveys have also shown pay stagnating at below inflation levels. The Chartered Institute of Personnel & Development said last week that pay was likely to stay below inflation for several more months and was unlikely to jump above inflation until next year.

John Philpott, director of The Jobs Economist, said the employment figures reflected the UK's booming economy but that workers were suffering "Paymageddon" as wages went into reverse.

"Good news for the jobless is being offset by ever slimmer pickings for those already in work, giving the UK labour market a distinctly bittersweet flavour. This doesn't look like a labour market that needs an interest rate hike to cool it down but instead one where workers appear desperate for a pay hike."

James Knightley, UK economist at ING Financial Markets, said the bad news on wages may be shortlived if the minimum wage rise scheduled for October has a ripple effect across the economy.

"It is important to remember that the national minimum wage goes up by 3% in October and this could be the catalyst for broader wage increases in the UK economy."

There were 2.08m unemployed people in the April to June quarter, 132,000 fewer than for January to March 2014 and 437,000 fewer than a year earlier.

There were also 8.86m economically inactive people – those out of work but not seeking or available to work – aged from 16 to 64. This was 15,000 more than for January to March 2014 but 130,000 fewer than a year earlier.

Powered by article was written by Phillip Inman, economics correspondent, for on Wednesday 13th August 2014 11.32 Europe/London © Guardian News and Media Limited 2010


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