Wage growth in the UK slowed in June as workers come under pressure from a renewed cost of living squeeze amid the economic impact from the Iran war, official figures show.
Figures from the Office for National Statistics show average growth in total earnings, including bonuses, fell to 4.1% in the three months to June, down from 4.3% in the three months to May. City economists had forecast a larger fall to 4%.
Liz McKeown, the ONS director of economic statistics, said the data showed “some softening” in the jobs market despite a broadly unchanged picture overall in a potential sign of stabilisation.
“Regular wage growth has remained broadly stable in recent months. However, private sector pay growth has continued to ease, while public sector pay growth remains elevated due to the timing of the latest NHS pay awards,” she added.
Highlighting resilience in the jobs market, pay growth excluding bonuses strengthened slightly from 3.4% to 3.5%. City economists forecast the rate would remain unchanged. The number of workers on company payrolls fell by 13,000 in July, a smaller decline than in recent months.
However, vacancies fell as small businesses warned they were facing a rise in employment costs. The headline rate of unemployment remained unchanged at 4.9%. City economists had forecast a drop to 4.8%.
The snapshot comes as households face a fresh hit to living standards as the fallout from the Middle East conflict rattles the world economy. Official figures due on Wednesday are expected to show that a rise in energy bills drove UK inflation close to 3% in July.
Annual growth in earnings after taking account of inflation was 1.3% in the three months to June. However, workers could face a squeeze as rising inflation approaches the slowing rate of earnings growth.
The figures highlight the challenge for Andy Burnham’s government to ease the financial pressure on households before a difficult autumn budget.
The new prime minister used his first week in office to announce a series of “breathing space” measures to ease the cost of living, and he has promised to combat unemployment as young people bear the brunt from recent higher rates of joblessness.
Ministers are awaiting a review into youth jobs from Alan Milburn, the former Labour cabinet minister, after the number of 16- to 24-year-olds not in education, employment or training (Neet) surpassed a million earlier this year for the first time in more than a decade.
Before a final report this autumn, Milburn told the Guardian this week that he would call on the government to “turbocharge” the provision of internships for young people with special educational needs.
Earlier this month he told this newspaper that he would also recommend new requirements for English primary schools to take steps to identify children at risk of leaving education at 16 without finding a job.
Pat McFadden, the work and pensions secretary, said: “It’s encouraging to see signs of progress in the latest figures, with employment on the up and a continued fall in unemployment rate.”
He said the government had put in place reforms to overhaul the benefits system and to support people to find work, including a youth jobs grant to encourage businesses to hire young people.
“We will continue to reform welfare and employment support so that more people can live independently and restore opportunity across the country,” he added.
