What's going on?
Official data released on Tuesday showed that wages in the UK increased by 3.2% last quarter compared to the same time last year – the fastest growth in almost a decade.
What does this mean?
Average UK weekly earnings rose between July and September, but so did the unemployment rate: it unexpectedly ticked up slightly to 4.1%. After accounting for inflation – the rate at which prices of goods and services increase – wages rose by just under 1%, meaning a typical Brit can afford a little more than the same time last year, all else equal. And just in time for Christmas!
Rising wages are generally a sign prices are headed up in an economy, since people have a little extra to spend – so the UK’s central bank is likely to increase interest rates to keep price increases to a manageable level (higher rates make it more expensive to borrow money to spend and encourage people to save instead).
Why should I care?
For you personally: Being a “G-Man” doesn’t pay.
Last quarter, UK private sector employees’ wages rose by 3.3% more than a year ago, compared to 2.8% for public sector (a.k.a. government) workers, according to Bloomberg. The difference might be explained by high sales and profit growth at British companies leaving more money in the kitty to reward staff – and keep them from being poached by rivals. Until about a year ago, government workers’ wage increases were capped – but with last month’s UK budget signaling more spending ahead, they’ll be hoping their pay catches up soon.
The bigger picture: Brexit might be partly to thank for higher wages.
Although the terms of Brexit have yet to be finalized, some Europeans aren’t waiting around to find out – 132,000 fewer of them worked in the UK last quarter versus a year ago. Less “slack” in the British economy as a result of jobs being created but not filled may have helped spur higher wages.