Key facts
- UK average earnings growth, including bonuses, slowed to 3.9% in the three months to July.
- Pay growth excluding bonuses remained unchanged at 3.5%.
- The number of workers on company payrolls edged down.
- Job vacancies are at their lowest level in over a decade outside the pandemic period.
- Oil prices have risen above $107 a barrel.
Wage growth in the UK slowed in July, adding to the cost of living pressures faced by households and presenting a complex picture for the Bank of England ahead of its interest rate decision. Figures from the Office for National Statistics (ONS) revealed that average growth in total earnings, including bonuses, eased to 3.9% in the three months to July, down from 4.1% in the previous period and matching economists' forecasts.
Pay growth excluding bonuses remained unchanged at 3.5%. The ONS also noted a cooling jobs market, with the number of workers on company payrolls continuing to decline, particularly in the retail and hospitality sectors. Job vacancies are at their lowest level in over a decade outside the pandemic, with smaller businesses citing increased labour costs as a factor affecting hiring.
This data emerges as the Bank of England prepares for a key interest rate meeting. While City investors largely anticipate the base rate will be held at 3.75%, there is a possibility of a quarter-point increase to combat persistent inflation. Financial markets are pricing in at least four rate hikes by the end of next year.
The central bank has previously indicated that a weaker labor market could help contain inflation. However, global energy prices have surged, with oil prices exceeding $107 a barrel, driven by geopolitical tensions in the Middle East. This rise in oil prices increases the risk of renewed inflationary pressures, creating a dilemma for policymakers.