UK wages up 3.7% on a year earlier, but job vacancies fall

Wage growth in the UK has picked up slightly. According to the Office for National Statistics (ONS), average weekly earnings (excluding bonuses) were 3.7% higher in the three months to August than a year earlier.

Wage growth slightly above forecasts

The figure is a little better than the 3.6% expected by economists polled by Reuters. Data for the three months to July was revised up slightly, to 3.6%.

According to the source, this continues a gradual rise from a low of 3.4% at the start of this year. In the private sector, pay grew by 3%, up from 2.9% previously. This is the first acceleration in that sector since the end of 2024.

The labour market remains weak

The ONS data also point to weaker demand for workers. Vacancies in the three months to September fell to 691,000, from 704,000 in the period to August. For the first time since the period ending April 2021, the figure dropped below 700,000. It is the lowest level since 2014, excluding the pandemic.

According to the ONS, the fall mainly affected smaller businesses, which are feeling the impact of higher labour costs.

Suren Thiru, chief economist at the Institute of Chartered Accountants in England and Wales, said the continuing fall in vacancies is a warning sign for the labour market. In his view, AI-driven economic growth is weakening demand for new staff, while high employment costs make matters worse.

What about interest rates?

The data could give the Bank of England an argument for raising interest rates. The Bank is due to assess whether the energy price shock caused by the war in Iran is turning into broader inflationary pressure, including through demands for higher pay.

Investors expect the Monetary Policy Committee to raise the main rate to 4% at its November meeting. So far, unlike the US Federal Reserve and the European Central Bank, the Bank of England has not raised borrowing costs.

What this means for Poles in the UK

The rise in pay refers to average earnings across the economy and does not mean a pay rise for every worker. Fewer job openings may make it harder to change jobs, especially at smaller firms. A possible rate rise could affect the cost of loans, including mortgages, but for now it is only what investors expect.