Rising inflation is feeding through to wage trends, judging from November average earnings data, showing 2.4% annual growth in regular pay, up from 1.0% a year earlier and the fastest since February 2009.
The pick-up in pay growth has been stronger in the private sector, with the November annual increase of 2.4% up from just 0.1% a year before.
Earnings growth, of course, is still far beneath inflation, resulting in a major squeeze on real wages. The gap, however, may reflect the normal lag between inflation and pay. The current shortfall of wages growth is the mirror-image of late 2008 and 2009, when pay trends took time to respond to a sharp inflation decline – see first chart.
Elsewhere in today's labour market report, the labour force survey measure of employee numbers continued to weaken, reversing a strong rise last spring, but a recovery in vacancies suggests a stabilisation or improvement in early 2011 – second chart. The vacancies rise, however, is explained by temporary hiring in connection with the 2011 Census, with private-sector job openings static in recent months.
Worries about the near-term impact of public-sector job losses may be exaggerated, with the Office for Budget Responsibility (OBR) forecasting that cuts will be back-loaded. Of a 330,000 fall in general government employment between 2010-11 and 2014-15, the OBR projects only 40,000 to occur by March 2012.
