Wage growth beats inflation for the first time in almost two years
UK wages grew at 7.8% in the three months to August- here’s what this means for unemployment, inflation and interest rates


UK wages are now rising at a faster rate than inflation for the first time since October 2021, as latest data from the Office for National Statistics (ONS) reveals regular earnings grew by an annual rate of 7.8% between June and August – 0.7% higher than Consumer Prices Index (CPI) inflation in the same period.
Revised figures from the ONS revealed that annual growth in regular pay excluding bonuses exceeded CPI inflation by 0.1% in the previous three months to July.
Total wages including bonuses jumped by 8.1% in the three months to August, although this was affected by NHS and civil service one-off payments.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Public sector pay jumped 6.8% higher from June to August – one of the highest growth rates since records began in 2001 – but continued to lag behind the private sector at 8%.
What does this mean for inflation?
Inflation fell to 6.7% in August, but this is still way above the government's 2% target.
The next round of inflation figures will be released tomorrow (18 October) and are expected to show another decline to 6.6%..
Despite the wage growth figures and slowing inflation, this doesn’t necessarily mean it will ease cost of living pressures for everyone.
Alice Haine, personal finance analyst at Bestinvest, said: “While high wage growth can ease the financial squeeze for households, it runs the risk of fuelling inflation if businesses pass on that cost to customers by hiking the price of their goods and services.
“This would only add further pressure to household finances at a time when energy prices are under threat from geopolitical tensions and rising demand amid the colder weather.”
Unemployment rate continues to rise
ONS provisional real-time figures estimated that UK workers on payrolls fell by 11,000 month-on-month to 30.1 million in September.
Vacancies also dropped to 988,000 in the three months to September, down by 43,000 on the previous quarter and marking the 15th drop in a row.
It’s good news compared to the same period last year, as vacancies were 256,000 lower.
Haine at Bestinvest says the rise in unemployment is down to “employers became increasingly cautious about hiring amid uncertain economic conditions.
Those who have already faced redundancy may find it harder to secure a new role while those looking to jump to the next rung of the career ladder could find their options narrowing.”
What does wage growth mean for interest rates?
Samuel Tombs at Pantheon Macroeconomics said the slight easing in the pace of wage growth should enable interest rate-setters at the Bank of England to hold off from further rises.
“Signs that wage growth is losing momentum should persuade the MPC to keep Bank Rate at 5.25% again next month,” he said.
He added the Bank is likely to hold rates at 5.25% until next spring “and then to reduce it to about 4.5% by the end of 2024”.
Additional reporting Press Association
Vaishali graduated in journalism from Leeds University and she has experience working with the likes of Leicester Mercury, Inews and The Week. She also comes from a marketing background, where she has done copywriting and content creation for businesses.
Currently writing about all things personal finance, Vaishali is passionate about finding the best deals around, whether it's the best credit cards or the cheapest personal loans, as well as sharing top money hacks to help people save and better manage their money.
-
Lloyds, Halifax and Bank of Scotland to shut another 45 branches
Lloyds Banking Group, which includes Halifax and Bank of Scotland, is set to close a further 45 branches in 2024 - find out if a branch near you is closing.
By Vaishali Varu Published
-
US stock trading app Robinhood launches in the UK
The low-cost trading platform has opened another waiting list for British investors - following two failed attempts to launch in this country - and is hoping to be fully operational next year.
By Ruth Emery Published
-
UK GDP: UK economy stagnates
Latest GDP data shows the UK economy showed no growth in the third quarter of the year due to rising interest rates. But have we side-stepped a recession?
By Vaishali Varu Published
-
ONS: UK economy recovered from pandemic faster than previously thought
Revisions from the ONS showed the UK economy has grown since the pandemic, while the latest data showed GDP grew in the second quarter of 2023.
By Nicole García Mérida Published