Wait for wage growth goes on (and on…)

New figures from the Office for National Statistics show another fall in real wages despite increasingly positive news in the wider economy. The new data reveals that Average Weekly Earnings (excluding bonuses) in Britain were £450 a week in December 2013 and grew by just 1.0 per cent in the year (comparing October to December 2013 with a year earlier), remaining near historic lows. This represents far slower growth than the 2 per cent recorded for both RPIJ inflation and CPI inflation in December 2013. Including bonuses, pay grew by 1.1 per cent in the same period.

Analysis from the Resolution Foundation confirms that Average Weekly Earnings are now £37 lower than their pre-crisis peak in April 2009 (on the basis of RPIJ), equivalent to a decline of £8 a year and a fall of 7.7 per cent. Real weekly wages have now been falling for 49months in a row.

The figures run alongside an apparent pause in the recent good news on employment. Unemployment rose slightly to 7.2 per cent (from 7.1 per cent) in the three months October to December 2013 compared to the three months earlier, although falling slightly in the latest data for January. Meanwhile the all-important employment rate fell slightly for the first time in seven months as jobs growth failed to keep up with population growth. This means that the ‘jobs gap’ – the number of jobs that would still need to be created to reach employment levels seen before the recession in 2008 – now stands at 680,00, slightly up from 650,000 a month ago.

Matthew Whittaker, senior economist at the Resolution Foundation, said:

“These figures bring slightly less good news than we’ve become accustomed to on unemployment, with slower falls than we’ve seen in recent months. This may well prove to be a pause reflecting seasonal hiring patterns.

“But the big story is again the continued fall in wages. Average weekly pay is now 8 per cent lower than before the crisis. Every month we continue to wait for sustained wage growth raises more questions about the fairness and sustainability of the recovery.

“It is also some concern that yesterday’s good news on CPI inflation contrasted with a rise in the RPI measure which includes housing and mortgage costs. Some households will be feeling more squeezed than the official statistics suggest.”