Wage growth in the UK slowed in June as the ongoing conflict in Iran affected the economy. Average total earnings growth, including bonuses, fell to 4.1% in the three months to June. This is down from 4.3% in the previous period, according to figures from the Office for National Statistics (ONS). City economists had expected a larger decline to 4%. Liz McKeown, ONS director of economic statistics, noted signs of "some softening" in the jobs market. However, the overall picture remained stable.
Key Details
Private sector pay growth eased to 2.8%. This is the weakest rate since October 2020. In contrast, public sector pay growth rose to 6.1%, influenced by recent NHS pay awards. The number of workers on company payrolls decreased by 13,000 in July. This matches a similar decline in June. The unemployment rate held steady at 4.9%, contrary to expectations of a drop to 4.8%.
Background
The economic impact of the Iran conflict has increased cost pressures for households. Official figures are expected to show UK inflation nearing 3% in July, driven by rising energy costs. James Smith, an economist at ING, suggested that the cooling labor market reduces the chance of the Bank of England raising interest rates. This is unless energy prices spike significantly due to the conflict. He highlighted that while government payrolls are growing, consumer-facing sectors like hospitality and retail are losing jobs.
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The slowdown in wage growth and rising inflation could pressure consumer spending. This is especially true in the retail and hospitality sectors. Investors may closely monitor the upcoming inflation data for further insights into the economic outlook.
Watch for the official inflation figures due on Wednesday. These are expected to reflect the impact of rising energy bills.
Based on reporting by: theguardian.com