UK salary growth saw a notable deceleration in July.
This moderation hints at potential interest rate cuts by the Bank of England.
Recent research from KPMG and the Recruitment and Employment Confederation (REC) revealed a slowdown in salary growth for both permanent and part-time staff in July. The permanent staff salary index fell to 56.5 from 57.1 in June, while the temporary salary index dropped to 50.9 from 53.7. Such trends suggest a modest decline compared to the preceding month.
Shoesmith added, “The interest rate cut is a welcome measure, and employers will need continued support to maintain confidence.” By aligning pay with inflation, businesses attempt to balance their payroll expenses amidst economic uncertainties.
These indices collectively signal that while businesses remain wary, there are pockets of resilience within the job market.
The central bank has shifted its focus from specific indicators to a holistic view of economic data. This change in strategy is due to declining data quality from the Office for National Statistics (ONS), which the Bank now supplements with alternative research, such as the KPMG and REC report.
By the end of 2022, the economy was 2.1 per cent larger than its pre-Covid size, an improvement on the ONS’s earlier estimate of 1.9 per cent.
This reestimation underscores the resilience of the UK economy and its ability to rebound from unprecedented challenges.
He further noted that some businesses might delay hiring until after Chancellor Rachel Reeves presents her first budget on October 30, seeking more clarity on fiscal policy.
The Bank of England has expressed concerns about evaluating labour market trends due to declining data quality from the Office for National Statistics (ONS). Low response rates to ONS surveys have raised doubts about their reliability.
The deceleration in UK salary growth presents both challenges and opportunities for the economy.
With potential interest rate cuts on the horizon, businesses and policymakers must navigate this transitional phase carefully.
