NIESR Wage Tracker: Underlying earnings to accelerate to 4.5%

Author(s): Lenoel, C Published: 12th October 2021

Main Points

  • The growth rate in average weekly earnings including bonuses (AWE) in Great Britain decreased in the three months to August to 7.2 per cent compared to a year ago, down from 8.3 per cent in the three months to July. This is in line with the 7.1 per cent we forecast last month.
  • Excluding base effects, the growth in average weekly earnings was at 4.2 per cent in the three months to August, unchanged from the three months to July.
  • A record level of vacancies and rising inflation suggest a future acceleration in wage growth.
  • We forecast underlying average weekly earnings (excluding base effects) to accelerate from 4.2 per cent in the third quarter to 4.5 per cent in the fourth quarter.

 

Figure 1: Average weekly earnings (incl. bonuses)

“The fact that the furlough scheme ended two weeks ago does not appear to have been a big labour market shock because it happened when employment was growing quickly. But a record level of vacancies suggests a future acceleration in underlying earnings growth from 4.2 per cent in the third quarter to 4.5 per cent in the fourth quarter. If that forecast proves to be correct, it will put additional pressure on the MPC to raise rates before the end of the year.”

Cyrille Lenoël

Principal Economist, NIESR


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