Early Forecast Sees Total AWE Growing At 6.7 per cent in Q4

Main points

• The latest ONS estimates suggest that the annual growth rate of average weekly earnings, including bonuses, was 8.1 per cent in the three months to August, while pay growth excluding bonuses was 7.8 per cent – representing one of the highest annual regular pay growth rate recorded since comparable records began in 2001. Our forecast for the third quarter of this year sees economy-wide regular pay growing at 7.6 per cent and total pay growth at 7.2 per cent. Our early forecast for the fourth quarter of this year expects to see these figures at 6.9 and 6.7 per cent, respectively.
• Private sector regular pay grew by 8.0 per cent in the three months to August– representing one of the largest growth rates seen outside of the pandemic period - while regular pay in the public sector grew by 6.8 per cent. Our forecast sees these figures at 7.8 per cent and 7.0 per cent, respectively, in the third quarter of 2023, and 7.3 and 4.5 per cent in the fourth quarter of 2023.
• The number of job vacancies fell by 4.2 per cent in the third quarter of 2023 relative to the second quarter, amounting to a 43,000 decrease. Unsurprisingly, the real estate activities sub-sector saw the highest fall in vacancies in this time, likely reflecting the contraction in the construction sector in the monthly GDP data due to high borrowing costs in this industry. Mining and quarrying saw the largest increase in vacancies, possibly as a result of the government’s announcement to grant hundreds of new oil and gas licenses on 31 July.
• Due to data collection issues affecting the ONS Labour Force Survey (growing attrition in the survey response rate), today’s release only reflects earnings, vacancies and HMRC data. This tracker will therefore not contain an update on any other information normally included in the ONS labour market overview or employment releases.

“Today’s ONS figures suggest that average weekly earnings, excluding bonuses, grew by 7.8 per cent in the three months to August, representing one of the highest annual rates recorded since comparable records began in 2001. Including bonuses, average earnings grew by 8.1 per cent, though that rate partially reflects one-off public sector payments made in the three-month period. These figures are marginally higher than our forecasts of 7.7 and 8.0 per cent, respectively, from last month’s tracker and indicate that, despite months of signs that the labour market might be loosening, wage growth continues to soar. On the one hand, this is positive in that it implies that workers in both the public and private sectors are seeing real average pay increases in for the first time in roughly two years; on the other hand, elevated wage growth continues to challenge monetary policymakers’ efforts to tame inflation."

Paula Bejarano Carbo
Associate Economist, NIESR

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