British workers’ pay rose 3.9% over last three months in sharp contrast to slowing economy
British workers’ basic pay is growing at the fastest rate for more than a decade despite mounting risks to the economy as Brexit looms.
In sharp contrast to the broader economic slowdown that has taken Britain to the brink of recession, the Office for National Statistics said annual average pay – excluding bonuses – rose by 3.9% in the three months to June, the highest rate since June 2008.
The ONS said about 115,000 more people found a job between April and June, when Theresa May extended the Brexit deadline until October, pushing up the number of people in work to a record of just over 32.8 million.
Unemployment rose slightly from 3.8% to 3.9%, but remains at its lowest level since the mid-1970s.
The ONS said total pay – which includes bonuses – was 3.7% higher in the three months to June than in the same period a year earlier.
The UK labour market has proven unexpectedly resilient since the Brexit vote three years ago, even as economic growth has slowed. GDP declined in the second quarter for the first time since 2012, raising the spectre of a recession before the UK’s scheduled departure from the EU on 31 October.
Some economists believe businesses have continued to hire workers to meet customer demand as they put costlier investments such as new technology, buildings and plant equipment on hold because of the uncertainty over Brexit. The British labour market is highly flexible, meaning workers are easier to hire and fire if the economic situation rapidly changes.
Business investment dropped in every quarter of 2018, the weakest run since the 2008 financial crisis.
Economists said the strength of the jobs market may have now peaked. Andrew Wishart, of the consultancy Capital Economics, said: “Demand for workers has cooled on the back of softer economic activity.”
The number of job vacancies fell for a sixth consecutive month in June. The latest ONS figures cover a period more than a month ago, while recent business surveys have indicated weaker demand for new workers.
The chancellor, Sajid Javid, said the latest snapshot showed Britain remained strong despite the challenges across the global economy. “I’m pleased to see 2.9 million more people are in work every day since 2010, wages are rising at their fastest in more than a decade, and people across the UK are taking home more of what they earn,” he said.
John Philpott, the director of the Jobs Economist consultancy, said pay growth had been fuelled by spring pay rises for some public sector workers and employees in jobs who benefited from the rising legal minimum wage.
“The pick-up in pay growth should not therefore be interpreted as a sign that the labour market is tightening, which might signal mounting inflationary pressure. On the contrary, the jobs, vacancies and redundancies data suggest that demand for labour is cooling, albeit only slightly,” he said.
Despite stronger growth in pay over recent months, this decade is on track to be the worst period for wage increases since the end of the Napoleonic wars 200 years ago. Households are gradually beginning to repair the damage, as real wage growth – which takes account of inflation – rises at the strongest rate since 2015.
Economists said the real wage gains were likely to boost higher consumer spending over the coming months, helping to strengthen the wider economy. The average weekly pay packet in Britain after inflation is, however, still below its peak before the financial crisis.
The TUC general secretary, Frances O’Grady, said: “With wages not yet recovered from the financial crisis, workers now face the risk of a new recession. A no-deal Brexit would shrink the economy, wipe out jobs and hold back pay. No responsible prime minister would ever consider causing that kind of crisis.”