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| UK wage growth hits four-year high of 2.7% in April | UK wage growth hits four-year high of 2.7% in April |
| (35 minutes later) | |
| Wage growth in Britain hit a four-year high of 2.7% in April, according to official figures, delivering a welcome increase to household finances following the fall in inflation this year. | Wage growth in Britain hit a four-year high of 2.7% in April, according to official figures, delivering a welcome increase to household finances following the fall in inflation this year. |
| But some analysts warned that the jump in real wages, the highest for seven years, would be short-lived if inflation continued to rise over the rest of the year and productivity remained flat. | But some analysts warned that the jump in real wages, the highest for seven years, would be short-lived if inflation continued to rise over the rest of the year and productivity remained flat. |
| The Office for National Statistics said average wages increased from 2.3% in March and 0.7% in April last year to record the strongest rate of growth since August 2011. CPI inflation fell 0.1% in April, the first time that the cost of living had turned negative. Inflation was 1.8% in the same month last year. | The Office for National Statistics said average wages increased from 2.3% in March and 0.7% in April last year to record the strongest rate of growth since August 2011. CPI inflation fell 0.1% in April, the first time that the cost of living had turned negative. Inflation was 1.8% in the same month last year. |
| Unemployment fell by 43,000 to 1.81 million, down 349,000 on a year earlier. The jobless rate stood at 5.5% in the three months to April. | Unemployment fell by 43,000 to 1.81 million, down 349,000 on a year earlier. The jobless rate stood at 5.5% in the three months to April. |
| The employment minister, Priti Patel, said the figures illustrated how Britain was becoming a more prosperous nation, especially after the rise in the three months to April was fuelled by an increase in full-time work. “The UK’s employment rate has seen the largest rise of any G7 economy over the last year,” she said. | The employment minister, Priti Patel, said the figures illustrated how Britain was becoming a more prosperous nation, especially after the rise in the three months to April was fuelled by an increase in full-time work. “The UK’s employment rate has seen the largest rise of any G7 economy over the last year,” she said. |
| Service sector pay rose at an annual rate of 2.9%, the highest since early 2009, while financial services pay was up 3.6%. Construction pay growth rose to a post-crisis high of 4.0%. | Service sector pay rose at an annual rate of 2.9%, the highest since early 2009, while financial services pay was up 3.6%. Construction pay growth rose to a post-crisis high of 4.0%. |
| But John Philpott, director of The Jobs Economist, said real wage growth would start to run out of steam in the autumn because the combination of low inflation, bumper pay packets and flat productivity was unsustainable. | But John Philpott, director of The Jobs Economist, said real wage growth would start to run out of steam in the autumn because the combination of low inflation, bumper pay packets and flat productivity was unsustainable. |
| “With price inflation at some point set to rise back toward 2%, a continuation of real wage growth at the current rate will have to be earned by a return to a more normal rate of productivity growth; if not there will eventually be renewed upward pressure on prices and, ultimately, interest rates. | “With price inflation at some point set to rise back toward 2%, a continuation of real wage growth at the current rate will have to be earned by a return to a more normal rate of productivity growth; if not there will eventually be renewed upward pressure on prices and, ultimately, interest rates. |
| “In recent months UK workers have benefited from an economy merely mimicking a strong underlying recovery. We should enjoy this while we can. But a genuine sustained recovery will need to be based on higher productivity.” | “In recent months UK workers have benefited from an economy merely mimicking a strong underlying recovery. We should enjoy this while we can. But a genuine sustained recovery will need to be based on higher productivity.” |
| His downbeat forecast was supported by figures showing manufacturing sector pay growth lagged behind at 1.0%. A less than glowing assessment by households of their personal outlook for the year also showed that under the surface, consumers remain reluctant to accept government assurances that 2015 ranks as a golden age of employment. The Markit household finance index fell from 45.5 in May to 43.8 this month. | His downbeat forecast was supported by figures showing manufacturing sector pay growth lagged behind at 1.0%. A less than glowing assessment by households of their personal outlook for the year also showed that under the surface, consumers remain reluctant to accept government assurances that 2015 ranks as a golden age of employment. The Markit household finance index fell from 45.5 in May to 43.8 this month. |
| The latest reading was the lowest recorded so far in 2015, and was consistent with a mild squeeze on household finances, said Markit. | The latest reading was the lowest recorded so far in 2015, and was consistent with a mild squeeze on household finances, said Markit. |
| It said: “Negative financial perceptions were reported in all of the monitored job categories during June, with IT/telecoms employees the most downbeat. The strain on finances was also broad-based at the regional level. The sharpest decline was seen in the West Midlands, closely followed by Scotland and the north west.” | It said: “Negative financial perceptions were reported in all of the monitored job categories during June, with IT/telecoms employees the most downbeat. The strain on finances was also broad-based at the regional level. The sharpest decline was seen in the West Midlands, closely followed by Scotland and the north west.” |
| Related: Enjoy rising wages while they last – it won't take much to slow things down | |
| Concerns about job security was a key factor weighing on households, with the index respondents personal prospects posting at a 15-month low. | Concerns about job security was a key factor weighing on households, with the index respondents personal prospects posting at a 15-month low. |
| Savings and cash available to spend also deteriorated in June, said the report, despite the rise in wages and low inflation. | Savings and cash available to spend also deteriorated in June, said the report, despite the rise in wages and low inflation. |
| “A surge in UK wage growth brings welcome news that the economic recovery is feeling through to pay packets, but also ups the odds of interest rates rising this year … It’s uncertain as to how much pay growth will continue to accelerate, as low inflation will hold down annual pay reviews. However, wage pressures have already built to an extent that would normally start to worry policymakers. | “A surge in UK wage growth brings welcome news that the economic recovery is feeling through to pay packets, but also ups the odds of interest rates rising this year … It’s uncertain as to how much pay growth will continue to accelerate, as low inflation will hold down annual pay reviews. However, wage pressures have already built to an extent that would normally start to worry policymakers. |
| “Private sector pay excluding bonuses rose at an annual rate of 3.2% in the three months to April, the best seen since 2008 (rates of 3.6% and 3.3% were seen in the single-month data for March and April respectively).” | “Private sector pay excluding bonuses rose at an annual rate of 3.2% in the three months to April, the best seen since 2008 (rates of 3.6% and 3.3% were seen in the single-month data for March and April respectively).” |
| Markit added: “The upturn in the labour market and low prices have boosted consumer confidence, with households feeling the least negative about their finances since the financial crisis. Consumers therefore look likely to continue to help drive the economic upturn in coming months. | Markit added: “The upturn in the labour market and low prices have boosted consumer confidence, with households feeling the least negative about their finances since the financial crisis. Consumers therefore look likely to continue to help drive the economic upturn in coming months. |
| “Some policymakers will therefore be getting increasingly twitchy trigger fingers given the encouraging news on pay growth, and a chance of a rate hike this year has risen substantially.“The key takeaway is that, if the pace of economic growth revives, as widely expected, the recent upturn in pay takes away the main remaining argument to hold off with raising interest rates, and pressure to tighten policy looks set to build significantly as we move into the second half of the year.” | “Some policymakers will therefore be getting increasingly twitchy trigger fingers given the encouraging news on pay growth, and a chance of a rate hike this year has risen substantially.“The key takeaway is that, if the pace of economic growth revives, as widely expected, the recent upturn in pay takes away the main remaining argument to hold off with raising interest rates, and pressure to tighten policy looks set to build significantly as we move into the second half of the year.” |