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UK wage growth hits 11-year high despite shrinking economy

Britons’ wages grew faster than at any time since the financial crisis in the three months to June, official figures showed today, despite the UK economy shrinking over the same period.

Meanwhile, the number of UK workers without a job rose slightly in the three months to June, although it stayed close to record lows, the Office for National Statistics (ONS) said.

The figures are the latest sign that the UK jobs market remains robust despite an economy stalling under the weight of Brexit and a global slowdown. Official figures last week showed British GDP shrank by 0.2 per cent in the second quarter of the year.

Wage growth reached an annual rate of 3.9 per cent in the second quarter of the year, higher than the 3.6 per cent growth in May. It also beat economists’ expectations of a 3.8 per cent rise.

The rise means real wages – with inflation taken into account – climbed at an annual rate 1.9 per cent in the second quarter excluding bonuses.

Yet unemployment rose slightly to 3.9 per cent of the working age population between April and June, figures from the Office for National Statistics (ONS) showed.

The score was above the 3.8 per cent seen in May and above predictions of the same figure again. It was lower than the four per cent unemployment rate of a year earlier, however.

Work and pensions secretary Amber Rudd said: “Households across the UK are earning a regular income, and millions more receiving a pay boost thanks to wages rising at their fastest in a decade – outstripping inflation for a 17th month in a row.”

“Our workforce increasingly reflects our vibrant society, with a record number of women in employment while the number out of work falls to an all-time low.”

She said young people were “entering a workforce that is flourishing and full of opportunity”.

ONS deputy head of labour market statistics Matt Hughes said that although “employment continues to increase” the “number of vacancies has been falling for six months, with fewer now than there were this time last year”.

“Excluding bonuses, real wages are growing at their fastest in nearly four years, but pay levels still have not returned to their pre-downturn peak.”

The ONS said average regular pay before tax and other deductions was estimated at £469 per week in real terms in June 2019. This was lower than the pre-recession peak of £473 per week.

Tom Stevenson, investment director for personal investing at Fidelity International, said: “The UK’s labour market is still the bright spot in the British economy.”

“Many households will feel they are enjoying a more comfortable standard of living at the moment. More people are in work than at any time since 1971.”

Tej Parikh, chief economist at the Institute of Directors, said the rise in unemployment shows the jobs market “may now be reaching its peak”.

“With investment in machinery and technology often deemed too risky right now, businesses have sought to bring on board more staff to help lift output,” he said. But this has meant “firms have found it harder to fill their openings”.

PwC chief economist John Hawksworth said that “productivity growth remains very weak”, with output per hour down by 0.6 per cent in the second quarter of 2019 compared to a year earlier.

“Weak productivity growth reflects subdued corporate investment growth over the past three years as businesses wait for greater clarity on Brexit.”

By Harry Robertson

Source: City AM

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UK wage growth finally outstrips house price growth

Despite the continuing uncertainty about the UK’s exit from the European Union, there are signs of optimism, at least where the UK’s job market is concerned. UK employers are continuing to hire, and wages are growing at a higher rate than house prices, giving potential homeowners some hope of catching up with the high UK housing prices and at least narrowing the property affordability gap.

According to the latest Rightmove Property Index, UK wage growth currently stands at 3.4 per cent, as opposed to house price growth of two per cent. Of course, these figures have different implications at different regional levels, with prospective home buyers in some parts of the country in a particularly strong position.

While asking house prices are lower this year than last  year in three out of four regions in southern England, the higher (and rising) costs of living there means that not all potential homeowners will have benefited from the wage increase rates. This is particularly true of rail commuters, since the costs of rail travel went up by 3.1 per cent in January.

The people who are likely to benefit the most from wage growth outstripping house price growth are those in areas with a generally better income to living costs ratio, notably the North West of England, which remains a property hot spot for both buyers and investors.

House prices in Manchester are growing at Brexit-defying rates, but, with the average price of £195,000, property there is still highly affordable in comparison with the South East, especially in conjunction with the lower costs of living in this city compared to London. Manchester is being constantly redeveloped, too, making it an attractive city for investor buyers. For instance, Manchester’s already iconic MediaCity UK development in Salford is entering its second, £1 billion stage that will see the site double in size.

Jonathan Stephens, MD, of  specialist property investment agency  Surrenden Invest, comments, ‘Such vast developments bring a wealth of opportunities, both for those who live in the city and for those looking to invest there. They can also trigger fundamental shifts in demand in the local housing market, with sudden increases in the need for rental accommodation meaning that the private sector has to rapidly up its game in terms of the number of properties on offer.’

BY ANNA COTTRELL

Source: Real Homes

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UK wage growth at new decade high as employers hire in the face of Brexit

British workers’ pay grew at its joint fastest pace in over a decade as employers extended their hiring spree, adding to signs that uncertainty about Brexit is prompting firms to take on workers rather than commit to longer-term investments.

Contrasting with other sluggish readings of Britain’s economy, total earnings, including bonuses, rose by an annual 3.5 percent in the three months to February, official data showed, in line with a Reuters poll of economists.

That was the joint highest rate since mid-2008 although in the month of February on its own the pace of wage growth slowed.

Britain’s labor market has defied the approach of Brexit, helping households whose spending drives the economy. Last week, Britain’s exit from the EU was delayed until October.

Employment grew by 179,000 in the three months to February, in line with the Reuters poll forecast, helping to keep the unemployment rate at 3.9 percent, its lowest since early 1975, the Office for National Statistics said.

However, the jobs surge could reflect nervousness among employers about Brexit and risks aggravating Britain’s long-standing productivity problem, the Achilles heel of the world’s fifth-biggest economy.

Workers can be hired and then fired if the economy takes a hit, whereas investment in technology and new machinery — which helps the economy over the long term — fell throughout 2018.

PRODUCTIVITY PROBLEM

“The elongated period of uncertainty has kept businesses in a hiring cycle,” Tej Parikh, an economist at the Institute of Directors, an employers group, said.

“Without a pick-up in investment, low productivity will also keep wages from growing further, particularly when considering the higher regulatory costs businesses are facing this tax year.”

Data earlier this month showed output-per-hour rose by only 0.5 percent in 2018, well below the annual average of 2 percent before the global financial crisis.

Accountancy firm Deloitte said on Monday that large British-based businesses were increasingly focused on cashflow as they worried about the long-term economic hit from Brexit.

The ONS said the increase in jobs over the past year was all coming from full-time workers, both employees and self-employed.

Average weekly earnings, excluding bonuses, rose by an annual 3.4 percent, the ONS said, in line with the Reuters poll and down from 3.5 percent in the three months to January.

It was the first fall in that measure of pay growth since the middle of last year.

The strength of the labor market is pushing up wages more quickly than the Bank of England has forecast, leading some economists to think it might move quickly to raise interest rates once the Brexit uncertainty lifts.

The BoE forecast in February that wage growth would slow to 3.0 percent by the end of 2019 with the overall economy likely to grow at its slowest pace in a decade.

Writing by William Schomberg; Editing by Peter Graff

Source: UK Reuters