Pay growth slows
The business news that matters
Hello and welcome to the latest edition of Off to Lunch…
The strong growth in average pay for UK employees has slowed for the first time since January, according to the latest data from the Office for National Statistics.
Pay excluding bonuses grew by 7.8 per cent year-on-year between June and August, the ONS said this morning. This is down from the 7.9 per cent recorded in the previous data between May and July. Pay including bonuses rose by 8.1 per cent, down from 8.5 per cent last month.
Despite the slight slowdown, pay is still rising at close to a record pace and ahead of the rate of inflation, which stands at 6.7 per cent. This means that the cost-of-living squeeze should be easing for some people, whose pay is rising faster than prices are.
Below you can see the reaction from the chancellor and more details from the ONS…
The sustained rise in pay is concerning the Bank of England, which does not want high inflation to be ingrained in the economy.
Huw Pill, the chief economist for the Bank, said yesterday that the Bank “still have some work to do” to get inflation down to the government’s target of 2 per cent. The data on pay has been “very high” and an “outlier”, Pill explained, adding:
“There are many indicators of wage development and they don’t all point the same way right now. Wage growth is running across a range of indicators that is not consistent with price stability.”
Andrew Bailey, the governor of the Bank, also said last week that the sustained rise in pay had been “puzzling”.
Nonetheless, the consensus among economists is that the slight drop in pay growth in the new figures increases the chances of the Bank holding interest rates at 5.25 per cent when the monetary policy committee meets again on November 2, rather than increasing rates further.
This is a big week for economic data in the UK, with the ONS scheduled to publish the latest data on inflation tomorrow too. The ONS had also been due to announce the latest numbers on unemployment today. However, it announced last week that it was delaying publication for a week due to a drop in the number of responses to its Labour Force Survey. The ONS said:
As we have explained previously – and in common with other national statistical institutes – response rates for some key ONS household surveys have been falling. This has complicated the production of some of the indicators based on the current UK Labour Force Survey (LFS).
Because of this, the publication of the next ONS Labour Force Survey is being put back slightly to give us additional time to produce the best possible estimates of the labour market using the best available data sources.
You can find that announcement here and the latest pay data here
Other stories that matter…
1. Rolls-Royce is cutting up to 2,500 jobs from its workforce of 42,000 around the world. The engineering group is combining its engineering, technology and safety teams into one division and wants a procurement and supplier management team to work across the entire company. Tufan Erginbilgic, chief executive of Rolls, said: “We are building a Rolls-Royce that is fit for the future. That means a more streamlined and efficient organisation that will deliver for our customers, partners and shareholders.” You can find the company’s statement here
2. The government has shelved plans to force large companies to disclose details about how they are making their business resilient and protecting it from fraud. These proposals were supposed to be part of an overhaul of corporate governance rules following a string of accounting scandals. Financial Times story here and more details from the Department for Business and Trade here
3. Nearly half of UK workers are already using generative AI technology like ChatGPT to try to speed up their jobs, according to a survey by Accenture. Bloomberg story here
4. Venture capital investor Marc Andreessen has written a “techno-optimist manifesto” about why we should be more positive about the advancements that modern technology is making. “We can advance to a far superior way of living, and of being. We have the tools, the systems, the ideas. We have the will. It is time, once again, to raise the technology flag,” he writes. You can find that piece here and a response from AI expert Gary Marcus here
5. The New Yorker has published a big analysis on the challenges facing San Francisco and why criticism that the city is in a “doom loop” of decline could be misplaced. This story is fascinating because of the questions it poses about the economic rise and fall of an area and the links between successful businesses and local prosperity (given some of the biggest companies in the world are based in the area). Here is an extract: “If the struggle in San Francisco’s downtown is the struggle of the American urban dream—how to be a global city and a small, authentic town at the same time—the solution rests with those who can build bridges between structures of power and grassroots enterprise.” You can read the feature here
And finally…
I was at Tottenham Hotspur Stadium on Sunday for the Baltimore Ravens v Tennessee Titans match in the NFL. It was a great afternoon at an impressive stadium. On the back of that match, I have a podcast recommendation for you - The Playcallers. This is a five-part documentary series by The Athletic about how four young coaches in their 20s and 30s worked together a decade ago and then went on to revolutionise the NFL, becoming head coaches themselves at different teams. Ultimately this podcast is not about sport - it’s about how innovation happens, the challenge of staying successful when everyone is chasing you, the power of youth, and the role of a leader when surrounded by talented people. People who don’t enjoy sport will still enjoy this podcast (you can ignore occasional chat about the technicalities of the sport) and there is plenty to learn. You can find the series below…
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Best
Graham