Wage growth at fastest pace in over a decade, despite risk of recession

Employees’ wages grew by 3.9% between March and May this year, the highest rate of growth since June 2008.

Economy and Policy August 14, 2019

Wage growth ticked up to the highest levels in more than a decade between March and May.

Pay grew by 3.9% excluding bonuses. However, with bonuses not enjoying the same level of growth, pay increases with bonuses included was marginally lower at 3.7%.

When compared against the rate of inflation, with the current consumer prices index measure at 1.9%, wages grew by 1.8% - the highest level in four years.

House buyers wary as prices fall on prospect of a no-deal Brexit

The last time that pay growth topped 3.9% was in June 2008 when wage growth stood at 4%, right on the precipice of the financial crisis.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “We’re still earning less than we were before the financial crisis. And while average pay is growing, it doesn’t mean everyone is getting an above-inflation pay rise. There are still plenty of people watching the value of their work fall year after year.

But, despite wage growth accelerating, the UK economy is doing the reverse. Last week, it was announced that gross domestic product (GDP) fell 0.2% between April and June following a “robust” first quarter of 0.5% growth, according to the Office for National Statistics. On an annual basis economic growth fell to 1.2% from 1.8%.

If in the third quarter GDP contracts again, the UK will technically be in a recession. The growth figures will be released in early November, following the 31 October deadline for the UK to leave the European Union.

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