2024 U.K. Wage Growth Stronger Than Expected

Analysis from the Bank of England (BoE) suggests that workers in the U.K. may have seen faster wage increases than official data from early 2024 previously revealed. 

Reuters reports average weekly earnings from February to April 2024 were 5.9% higher than the previous year. Although this is a decrease from the 8.5% peak in mid-2023, it remains significantly above the rate deemed consistent with 2% inflation by most BoE policymakers. 

The research was conducted by BoE economist Tomas Key and does not represent the views of all BoE policymakers. However, it unveiled a new wage growth measure, indicating a 6.5% rise in pay growth in the first quarter of 2024. This is reported by Reuter’s to be up from just under 6% in late 2023.  

The figures also highlight the ongoing strength in post-pandemic wage increases, even as previous data showed a decline in growth rates excluding bonuses.  

“The estimated trend currently lies a little above the headline rate of wage growth – although there is considerable uncertainty about the exact position, which may well be revised as we receive more data – and significantly above its pre-pandemic level,” said Key. 

These findings emerge during broader global conversations about cost of living, inflation, and post-pandemic economic recovery.  

In the U.S., annual posted wage growth has held steady at 3.1% for the past three months, mirroring the pre-pandemic average. An analysis of the data published by Indeed’s Hiring Lab suggests wage growth may have stabilized.  

“For central bankers and anyone else concerned about inflation, moderate and low wage growth is a sign the labor market isn’t pushing up inflation,” according to Hiring Lab. “But keep in mind that wage growth is often a lagging indicator of labor market strength, as employers adjust their wages after noticing changes in the difficulty of hiring or retaining workers.” 

Official statistics often rely on standardized methodologies and formal payroll reports, which some experts say might not capture more dynamic and immediate labor market changes. Key’s analyses suggest that rapid pay growth is a critical factor preventing the BoE from reducing interest rates from their 16-year high of 5.25% — despite inflation returning to its 2% target in May. 

This research echoes previous critiques from several economists who have long argued that real-time economic indicators, such as online job postings and tax data, might offer more timely insights than traditional surveys. For instance, the Office for National Statistics (ONS) in the U.K. uses various real-time indicators to track economic activity and social changes. This includes data from online job postings and administrative sources, all of which could offer a more immediate picture of the labor market and other economic trends.  

New ways of analyzing wage data could mean better insights that could shape decisions on interest rates, taxation, and wage negotiations.