Record employment but summer slowdown in pay recovery

Pick-up in productivity should help to support wage growth in coming months

The UK’s headline employment rate hit another historic high, but real wage growth slowed over the summer. A pick-up in productivity and further falls in unemployment should support upward pay pressure in the coming months, the Resolution Foundation said today (Wednesday) in response to the latest ONS labour market figures.

Real average weekly earnings grew by 2.5 per cent in the three month to September, down from 2.8 per cent on the previous quarter.

Productivity picked up again in the last quarter, rising by an implied 1.4 per cent year-on-year, though the Foundation notes that it remains well below its pre-crisis average of 2.4 per cent a year.

Employment in London has grown fastest since mid-2008 (+2.7 per cent), while Northern Ireland, Scotland and the South East are yet to return to pre-crash employment levels.

Matt Whittaker, Chief Economist at the Resolution Foundation, said:

“It is encouraging to see employment rising again after a bumpy few months. But the slowdown in the pace of the UK’s pay recovery may signal that the rebound enjoyed during much of 2015 has eased.

“The good news is that signs of a return to productivity growth should generate more upward pay pressure. That will be particularly important once inflation starts to rise.

“Despite the positive jobs figures, there is still plenty of scope for further growth. But getting there – and becoming a genuine world leader on employment – will require renewed policy action.”