UK wage growth cools as Iran war fuels fresh cost of living pressure
UK wage growth slowed in June as the economic fallout from the Iran war adds to cost of living pressures on households. Unemployment held steady, but rising inflation could soon outpace earnings growth.
Official figures from the Office for National Statistics show UK wage growth easing, as households brace for renewed cost of living pressure linked to the economic fallout from the Iran war. Total earnings growth, including bonuses, dropped to 4.1% in the three months to June, down from 4.3% the previous period — a smaller fall than the 4% economists had expected.
ONS director of economic statistics Liz McKeown said the figures point to some softening in the labour market, though the overall picture remains largely stable, potentially signalling a degree of stabilisation. She noted private sector pay growth continues to ease, while public sector pay remains elevated due to the timing of recent NHS pay awards.
By contrast, pay growth excluding bonuses ticked up slightly, from 3.4% to 3.5%, pointing to some resilience in the jobs market. Payroll employment fell by 13,000 in July, a smaller decline than in previous months. Job vacancies fell as small businesses reported rising employment costs, and the unemployment rate held at 4.9%, higher than the 4.8% economists had forecast.
The data lands as households brace for a fresh squeeze on living standards linked to the global economic fallout from the Middle East conflict. Figures due Wednesday are expected to show energy price rises pushed UK inflation close to 3% in July. Real wage growth, adjusted for inflation, stood at 1.3% in the three months to June, but workers could face tighter conditions if inflation continues to close in on the slowing pace of pay growth.
Government response
The figures underline the challenge facing Prime Minister Andy Burnham's government as it seeks to ease financial pressure on households ahead of a difficult autumn budget. Burnham used his first week in office to unveil a set of measures aimed at easing cost of living pressures, and has pledged to tackle unemployment, particularly among young people.
Ministers are awaiting a review on youth employment from former cabinet minister Alan Milburn, after the number of 16- to 24-year-olds not in education, employment or training passed one million earlier this year for the first time in over a decade. Work and Pensions Secretary Pat McFadden said the latest figures showed encouraging signs of progress, citing rising employment and a continued fall in unemployment.
