Rising inflation could lead to pay squeeze, says CIPD

The latest labour market statistics from the Office for National Statistics has shown another increase in the number of people in work, with an employment rate of 74.5% – the highest since records began in 1971. Despite a modest rise in average wages, the CIPD says Brexit and rising inflation could still have a negative impact on pay across the country.

Commenting on the latest ONS figures, CIPD Acting Chief Economist Ian Brinkley said: “Overall job growth has been strong, so in the short term the labour market remains resilient. There are some underlying weaknesses with most of the new jobs being part time and there has also been an increase in temporary work.

“The overall unemployment rate remains stable, but there has been a decrease in the number of people classified as economically inactive who say they want a job. More worrying is that youth unemployment has modestly increased, rising by 7000 in the last quarter.

“However, it is still too early to read any Brexit impact into these figures, as they only cover the period to August. Any future impact is more likely to show up through a gradual slowdown, rather than a dramatic decline, as employers become more cautious about hiring.

“Regular pay has remained stable, with average weekly earnings increasing by 2.3% comparing the last three months with the same three months a year ago. However, as inflation is widely expected to exceed 2% next year as the impact of the pound’s devaluation feeds through into prices, we could be heading for another period of very low or negative real wage increases for many workers.”

Read the full ONS report at bit.ly/2e5nWRm