Bank of England Monetary Policy Committee member Megan Greene warned Oct. 20 that wage growth may be leveling off too high, raising the risk that higher energy costs keep inflation elevated.
Private-sector regular earnings rose 3.0% in the three months through August, the Office for National Statistics (ONS) reported. A separate private-sector measure the Bank constructed from payroll records showed annual median pay growth of 4.4% in September. The September payroll estimate is preliminary and subject to revision.
Those figures cover different periods and types of pay. The survey's regular-pay measure excludes bonuses and arrears, which the payroll measure includes. Changes in the mix of jobs can also affect the comparison, Greene said.
For her adjusted comparison, Greene used a different payroll figure: mean private-sector pay growth of about 5% in August. After accounting for changes in industry composition and making an approximate adjustment for bonuses and arrears in the payroll data, she estimated growth of 3.4% in the survey and 4.5% in payroll records. She cautioned that the bonus adjustment was imprecise.
Employer surveys, negotiated pay and advertised wages suggest annual pay growth will settle around 3.5% over the next year, Greene said. She sees a greater chance of a higher outcome than a lower one. She cited earlier wage forecasts that fell short of actual increases and settlements that exceeded expectations. Most 2027 pay agreements will be reached from January through April, when she expects inflation to exceed 4%.
Greene also said the labor market may have less spare capacity than previously thought. She pointed to a decline in unemployment from 5.2% in the three months through January to 4.7% in August. Her wage outlook is her own assessment, rather than a committee forecast.
In September, the committee said it had seen little evidence that higher energy costs were already materially affecting wage and price setting. Members voted 6-3 to keep Bank Rate at 3.75%, with Greene among those seeking an increase to 4%.
The ONS reported August Consumer Prices Index (CPI) inflation of 3.1%, above the Bank's 2% target. It is scheduled to release September inflation data Oct. 21, before the Bank's next rate decision Nov. 5.
