Strong Wage Growth Adds to Concern Over Inflation Expectations

Main points

• The latest ONS estimates suggest the annual growth rate of average weekly earnings, excluding bonuses, was 6.4 per cent in the three months to November, marginally higher than the 6.3 per cent our tracker predicted last month. Though this regular pay growth is the largest observed outside of the pandemic period, today’s estimates also highlight that real regular pay in the UK fell by 2.6 per cent, remaining among the largest falls since comparable records began in 2001.
• NIESR’s wage tracker now estimates that total average weekly earnings grew at an annual rate of 6.4 per cent in the fourth quarter of 2022. Our early estimate for the first quarter of 2023 is for total average weekly earnings to maintain growth at an annual rate of 6.4 per cent.
• The disparity in public and private sector wages has fallen for a consecutive month, though it remains among the largest seen outside of the pandemic period, with private sector regular pay growing by 7.2 per cent while regular pay in the public sector grew 3.3 per cent. However, we estimate this disparity fell over the course of the fourth quarter of 2022 and will continue to fall through the first quarter of 2023.
• In November 2022, 467,000 working ways were lost due to labour disputes – the highest we have seen since November 2011. While this pales in comparison to the figure of 2.5 million days per month recorded during the ‘winter of discontent’ in 1979, it remains a concern as more industrial action is set to occur in the coming months.

“Today’s ONS estimates suggest that total and regular average weekly earnings grew by 6.4 per cent in the three months to November, representing the strongest growth rate in regular pay observed outside of the pandemic period. Nonetheless, workers continued to face real income falls due to elevated inflation as real total and regular pay both fell by 2.6 per cent. Last month, we estimated that steep wage growth in the fourth quarter of this year would be driven by the public sector. November data indicates that, while the public sector saw a significant growth in average regular pay of 3.3 per cent in the three months to November, the private sector saw growth of 7.2 per cent, adding to the concern that high inflation expectations have embedded themselves in the UK labour market.”

Paula Bejarano Carbo
Associate Economist, NIESR

See our previous tracker to follow the analysis