The annual growth in employees’ regular earnings between May and July of this year was just 5.1%, the lowest wage growth since April 2022, according to data from the Office for National Statistics (ONS).
Pay growth including bonuses has also fallen in this period to 4% and, when adjusted for inflation, real earnings growth for the period was just 2.2% for regular pay.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, noted that this would be good for interest rates and will “cement expectations” that the Bank of England will deliver two interest rate cuts before the end of the year.
Richard Carter, head of fixed interest research at Quilter Cheviot, added: “The Bank of England’s next interest rate decision is now just over a week away, and today’s data, alongside the inflation and GDP prints due out before it meets, will no doubt play a major role in whether it opts to reduce rates further or hold for now.
“Markets have been pricing in a more aggressive path of rate cuts in the US than the UK, and unless something remarkable appears in either of these prints it is unlikely we will see this change.”
However, analysts remain concerned about the labour market’s impact on people’s finances, with declining wage growth and the potential for rising inflation both hitting the public heavily.
Sarah Coles, head of personal finance at Hargreaves, said: “Already the barometer shows that just under a third of people still have poor financial resilience, and those on lower incomes, renters, single people and those who are out of work still have a horrible struggle to make ends meet.”
Carter concluded: “The ONS data is also a lagging indicator, and yesterday's report from BDO suggested that, in August, the jobs market suffered its worst month in more than a decade as interest rates have started to bite.”