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Real wages still falling

Laith Khalaf
negotiating a pay rise

Average weekly wages rose by 2.5 percent over the last year according to latest figures from the ONS. Laith Khalaf, Senior Analyst – Hargreaves Lansdown.

Wages are heading in the right direction, though the rate of growth is hardly jaw-dropping, and significantly still lags behind the rate of inflation. That means the consumer squeeze is still alive and well, and the pick-up in wage growth anticipated by the Bank of England is yet to materialise.

For UK consumers, pennies remain a precious commodity, so we can expect continued pressure on the retail sector and a focus on discount shopping as a result of tight household budgets.

Economically speaking, not much has changed in the labour market, which is still characterised by low unemployment and stubbornly stagnant wages. An interest rate rise is now expected in May, though continuing weak wage growth may prove to be a fly in the ointment.

A small rise in unemployment also provides food for thought for the Bank of England, and while one data point hardly constitutes a trend, it does merit keeping a close eye on, particularly if it serves to weaken wage growth from an already low base.’