Pay is rising faster than prices but not everyone will be feeling better off

Real terms pay is growing at its fastest pace for two years but cracks are showing in the job sector, ITV News Business and Economics Editor Joel Hills reports on the latest unemployment figures

Three things to note about the latest assessment of the labour market from the Office for National Statistics.

1. Pay is rising faster than living costs and the chancellor is feeling pleased.

According to the ONS, average weekly earnings in the UK grew by 7.7% between July and September. Therefore, when adjusted for inflation, what’s called “real” pay grew by 1.3%.

In a statement released by the Treasury this morning, Jeremy Hunt describes the figures as “heartening” and promises his Autumn Statement next week will “get people back into work and deliver economic growth”.

2. Not everyone will be feeling better off. 

“Real” pay is adjusted for inflation, it is not adjusted for tax or the impact of higher interest rates - which are squeezing many households with mortgages. And pay is growing at different rates in different sectors of the economy.

The average person working in business and finance has seen their pay grow by much faster than the average person working in constructions. And many households on the lowest incomes are really struggling.

According to the Joseph Rowntree Foundation, around two million low-income households (that’s one in six low-income households) have been forced to turn off their fridge or freezer in the last six months to save money.

It’s a reminder than although the headline rate inflation is falling (and will probably fall below 5% tomorrow) it is still high and causing hardship.

3. Strong pay-growth is something to celebrate if your pay is growing strongly but it’s too strong for the Bank of England.

Wage growth eased slightly in the three months to September but the Bank will judge that annual growth of well over 7.8% in the private sector and 7.3% in the public sector is “inflationary” in the sense that there’s a risk companies are funding pay deals at these levels by raising their prices.

Until pay growth eases significantly, the Bank will feel inclined to keep interest rates where they are. Most pay settlements are finalised between January and April. 

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