Pay packets have barely grown since the summer

Total pay growth fell for the fourth consecutive month, reflecting the fact that total private sector pay has been broadly flat since August, the Resolution Foundation said in response to the latest ONS labour market data.

Headline annual pay growth in the three months to November dropped to 6.6 per cent, largely reflecting strong pay growth in the first half of 2023, with shorter-term measures highlighting an even sharper recent fall in pay growth.

Looking at the rise in pay over the past three months, private sector regular pay growth fell to 2.5 per cent on an annualised basis. This level of pay growth is consistent with inflation falling to 2 per cent – which should reassure policy makers that wages are no longer fuelling inflation.

Total pay peaked in June off the back of large NHS bonuses. Since then, public sector pay has fallen back, while private sector pay stopped growing in September.

With inflation falling even faster, regular real wages grew 1.4 per cent in the year to November. But again near-term measures of growth are much softer – real regular pay grew only 0.2 per cent at an annual rate in the three months to November.

The jobs market continued to loosen, with the number of job vacancies falling for a 18^th consecutive month. While the number of payrolled employees provisionally fell on the month in December, the broad picture from the data is of fairly slow and steady growth in employment.

Hannah Slaughter, Senior Economist at the Resolution Foundation, said:

“2023 was a year of two halves for pay packets, with strong growth in the first six month of the year, and barely any growth at all after the summer. This means that annual pay growth will continue to fall in early 2024 – and is no longer fuelling inflation.

“With the labour market continuing to cool, the big question is at what level pay growth will stabilise – and what this mean for the health of workers’ real wages.”