Ritika Janiya
A slow pace in Britain’s wages is now at an estimated two-and-a-half-year low, giving hope for interest rate cuts. The slowdown has many analysts believe that the Bank of England might lower interest rates in its November meeting.
Wage growth between June and August is reported as 4.9%, a bit smaller than previous measures at 5.1%. The slim decline has fueled speculation that the Bank of England will set its interest rates at next month’s meeting from 5% to 4.75%.
Though wages are rising at a slower pace, they still continue to grow more rapidly than inflation is rising, which is the rate at which prices rise. However, policymakers believe that this will not prevent the Bank of England from pushing through its rate-cut agenda.
Why does wage growth matter to interest rates?
The Bank of England is also focusing on the speed at which wages are increasing. When this increases too fast, it pushes up the cost to the firms operating their businesses. Companies may then raise the prices of goods and services to recover these costs, hence leading to greater inflation. A related consequence is that if inflation accelerates, it will not be easy for people to afford basic goods and services, thus hitting the economy.
Yael Selfin, chief economist at KPMG UK, states, “Wage growth began to slow, which coupled with the slightly slower growth within the country may spell more trouble for the rate setters, indeed setting up the Bank of England to cut interest rates and help spur the economy.”
Job Market Trends and Unemployment Rate
The Office for National Statistics (ONS) also let out some interesting details about the UK job market in its latest report. The unemployment rate decreased to 4%, meaning more people get jobs. However, economist Ashley Webb at Capital Economics warned that this does not necessarily mean the labor market is booming. According to him, there are still underlying issues within the labor market that need attention.
The ONS also warned that the unemployment figures should not be taken at face value considering that some problems characterize the data they collect. They posited looking at other indicators like payroll numbers, which have been flattening lately, meaning fewer new jobs are being created.
Fewer Job Vacancies
There is also a decline in job openings in the UK, which indicates that firms have fewer hiring activities than before. According to the job openings level, it dropped to 841,000 during July and September. While this remains above levels seen before the pandemic, it signifies a sign of business reluctance to expand the workforce.
It’s been a slow-motion car crash,” said Reed, the boss of recruitment consultancy Reed. “Companies are all being cautious about hiring new workers with the slow economy and the higher interest rates, which have been making it more expensive for businesses to borrow money and invest in their operations.”.
Some firms also shy from increasing hiring due to fear of unknown future policies which will cost them. For example, a possible strengthening of workers’ rights through a Labour Party party could come at a cost to business firms, as this might compel them to purchase expensive labor. Some businesses are also waiting to see what the new budget would bring changes into, particularly National Insurance contribution.
Worker Shortages Concern
Moreover, the UK economy is facing a lack of enough people to work. Based on data from ONS, the number of people who are “economically inactive,” or those who are neither working nor seeking a job, is marginally low at 21.8%. Nonetheless, the rate is higher than before the pandemic.
Worker shortages would probably top the list of most problems for the majority of industries because companies now cannot find enough manpower to fill up vacant positions. The condition has been there for a long time, primarily due to the pandemic, where most were left jobless.
Youth Fighting Hard in Work
Unemployment has also risen among the young people, particularly between the ages of 18 and 24. The ONS document shows that the jobless rate for this age group of youth stood at 12.8% over June and August. It is still above its pre-pandemic stage.
It has become very difficult for most of the young people to even find any work. However, for some of these charities like Resurgo have helped a number who have lost their confidence and skills back to the job market.
There is 21-year-old Rocky Minhaaj Uddin, employed at Nando’s after eight months of unemployment; a year after joining, he got promoted to supervisor with the help of the support system of Resurgo. Rocky advises those who really find it difficult to search for employment, as it can make a great difference.
Pensions and Pay Increases
Apart from this, reports have also emerged relating to wages and the job market. There are some pieces of good news and pensions as well. Figures brought out in this week reveal that the state pension will slightly increase next year, with figures showing wage growth.
If these calculations prove correct, the full flat rate state pension – payable to those who have become eligible since April 2016 – will therefore be expected to increase to £230.30 a week, or nearly £12,000 per year. The older, basic state pension, payable to those retiring before April 2016, will be steered to increase to £176.45 a week, and this would take the year total to over £9,000.
According to former pensions minister Sir Steve Webb, this will be an increase welcome to pensioners but also a potential source of additional expense for the government when it reveals its budget.
Tips to Get a Pay Hike
To get a better financial life, here’s how you can get yourself a pay rise:
Schedule in advance and make a call to the boss requesting to discuss, for both of you need preparation for a great discussion.
Be prepared: Take along a list of achievements and contributions that you have made towards the company.
Do not hesitate: Know your worth and get confident with regard to discussing your contribution.
Do Your Homework: Research online job postings and see what people in the same occupation are getting paid.
Stay Persistent: If you’re not going to get a raise now, keep the conversation open and don’t be afraid to start looking elsewhere if necessary.
Of course, it looks like small detail in the slowdown of wage growth, but this has caused hopes for an interest cut that may ease financial pressures on companies and individuals alike. The UK’s job market remains complex, but with appropriate support, it will help both companies and workers find their way during these challenging times.
