As inflation Soars In The UK, Real Wages Fall At A Record Rate.

According to data that was released by the Office of National Statistics on Tuesday, real wages, which reflect the power of employee’s pay after accounting for inflation, decreased by an annual 3% in the most recent quarter. Real wages reflect the power of employee’s pay after accounting for inflation.

According to the ONS, while the average pay grew by 4.7% in the period from April to June (excluding bonuses), the cost of living surged at an even higher rate and outpaced the growth of wages.

According to Darren Morgan, director of economic statistics for the ONS, this is having an effect on the purchasing power of people’ incomes in their day-to-day lives.

“There has been a continuing decline in the real value of pay. When bonuses are taken into account, it is still falling at a rate that is quicker than any other time since similar records were first kept in 2001,” he remarked.

Households in the United Kingdom have been feeling the strain of increased financial strain due to higher energy and food expenditures. As a result of the continued rise in the cost of living issue that has taken hold of the nation, people are seeing their purchasing power decline.
Inflation in the United Kingdom reached a new 40-year high of 9.4% in June, and analysts anticipate that it will climb past 13% by October. This month, in response to rising prices, the Bank of England raised interest rates by 50 basis points, bringing the total to 1.75 percent. This was the greatest single increase in interest rates in 27 years.

According to the economist for the United Kingdom branch of the website Glassdoor for careers, Lauren Thomas, inflation and rising costs are the primary concerns of workers right now.

“The only thing that will remain the same in 2022 is change, and prices will continue to climb. Workers are feeling the pinch despite robust wage growth and a tight labor market, as inflation is emerging as the biggest winner in the current economic climate. The fact that real salaries have fallen by a record 3.0 percent due to inflation means that the cost of living is a priority for many people who are looking for work,” she said.

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The data from the ONS also showed that the unemployment rate stayed the same, at 3.8%, although the number of job openings decreased within the same time span.

According to James Smith, an economist at ING who specializes in developed markets, the Bank of England will be keeping a careful eye on both the rate of wage rise and the unemployment rate in the United Kingdom.

“The official forecasts of the Bank of England point to a material increase in the unemployment rate over the next couple of years; however, policymakers will be looking for signs that firms are ‘hoarding’ staff even where margins are squeezed, because they are concerned about their ability to rehire again in the future. The rate of wage rise is currently picking up decent steam, and the committee will be concerned about whether or not this can be maintained, he added.

In the future, this may result in the Bank of England increasing interest rates by a significant amount, as suggested by Smith:

Even if we are getting closer to the conclusion of the tightening cycle, “for the time being,” we think there is not much in these recent numbers that will prevent the Bank of England from hiking interest rates by another 50 basis points in September.