Wage growth slows to its lowest since the year 2022

News Article: Wage Growth Slows Amidst Cost-of-Living Crisis

The cost-of-living crisis continues to impact lower-income households, according to Sarah Coles, head of personal finance at Hargreaves Lansdown. The struggle to make ends meet at the end of the month persists, despite recent developments in wage growth.

The Office for National Statistics has released data showing that wages are rising at their slowest pace since summer 2022. Annual wages including bonuses were 4.5%, a decrease from the previous month. After inflation, wages were up 1.6% including bonuses and 2.4% excluding bonuses.

Susannah Streeter, head of money and markets at Hargreaves Lansdown, suggests that this slowing wage growth is good news for interest rates. However, it might not be enough to alleviate the struggles of those on lower incomes during the cost-of-living crisis.

Services inflation continues to run hot, driven by higher wages. This suggests that the slowing pace of wage growth might be an indication that inflation might be slowing as well. Yet, the slowing wage growth is likely still faster than what the Bank of England would feel comfortable with to lower interest rates.

Rob Morgan, chief investment analyst at Charles Stanley, states that today's job numbers have all but ended hopes of a further interest rate cut for a few months. Vacancies remained 11% higher than in 2020, and the unemployment rate dipped on an annual and quarterly basis to 4.2%.

The employment market taking a long time to balance strengthens the case of the MPC hawks who want to wait for more evidence before they reduce rates any further. Sarah Coles also notes that real wages are still growing, meaning more people have escaped a cost-of-living crisis.

Wage growth can lead to higher savings interest rates as increased income often boosts demand for saving products, prompting banks to offer better rates to attract deposits. However, the slowing wage growth might mean a slower increase in savings interest rates in the near future.

Susannah Streeter adds that it seems highly likely there won't be another rate cut in September. Yet, she also suggests that we might see slightly higher inflation in the coming months due to slower wage growth.

In conclusion, while the slowing wage growth might offer some relief to the Bank of England in terms of controlling inflation and interest rates, it does not seem to be enough to significantly alleviate the struggles of those on lower incomes during the cost-of-living crisis. The employment market continues to recover, but the pace of wage growth remains a concern for many.