UK earnings are at one of their lowest levels in three years after inflation climbs to highs of 2.9 percent.
The Office of National Statistics (ONS) released its Labour Force survey results today, detailing that workers’ total earnings have fallen by 0.4 percent, after taking into account inflation, in the three months to April.
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The ONS said that this is the first annual decline in total earnings since 2014.
Pay has increased marginally this year, by 1.7 percent, which was lower that the growth rate in the first three months to March, around 1.8 percent. This is the weakest rate of growth since three months to January 2015.
Yesterday, it was announced that inflation had reached 2.9 percent, the highest level since June 2013. Prices are now rising faster than the Bank of England’s 2.0 percent target.
It appears that the UK economy is still feeling the effect of the Brexit referendum last year, which caused a sharp drop in the value of the pound and pushed up import costs.
Ian Stewart, chief economist at Deloitte, said:
In the past, this sort of labour market tightness would have been associated with rising wages. Yet today, earnings growth is flatlining as inflation surges. It looks like the recession has further weakened the bargaining power of labour, even when jobs are plentiful and inflation’s rising.
John Hawksworth, chief economist at PwC, said:
With inflation likely to be heading above three percent later this year, the squeeze on real pay growth is now getting serious and is likely to dampen real consumer spending growth for some time to come. The cost of Brexit to people’s living standards due to the fall in the pound is becoming ever more apparent. The squeeze is even more severe in the public sector, where pay is only rising at around one percent. The sustainability of this pay policy for nurses, doctors, teachers and other key public service workers will come increasingly into doubt as inflation rises to three percent and above later this year.
This drop in disposable household income is expected to have an impact on consumer spending. The latest forecast for retail sales, set to be released tomorrow, are expected to show that retail sales fell in May for the second time in three months.
Despite the doom and gloom over wages, UK unemployment is now at 4.6 percent, the lowest level it has been since 1975.
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As well, it’s worth noting that the number of non-UK national from the EU working in the UK increased by 171,000 between the January and March period in 2016 and the January to March period this year.
This is despite concerns from many businesses that EU workers would choose to leave the UK after the Brexit vote.
The same cannot be said for the NHS, however. This week, the Nursing and Midwifery Council (NMC) announced that the number of EU nurses registering to work in the UK has fallen by 96 percent, less than a year after the UK voted to leave the European Union.