Latest Labour Market Statistics published by ONS

Big jump in pay including bonuses for staff in private sector services doesnít spell rising wage cost threat to economy.

The latest quarterly labour market statistics, published earlier today by the Office for National Statistics (ONS), shows a substantial increase in the rate of growth in average earnings including bonuses, while the Governor of the Bank of England struck a hawkish tone on pay pressures this morning when launching the Bankís quarterly Inflation Report. But says John Philpott, Chief Economist at the Chartered Institute of Personnel and Development (CIPD) the outlook for pay inflation is benign and hawkish words on pay are unnecessary.

Dr Philpott commented on the latest ONS figures as well as related aspects of the Bank of Englandís quarterly Inflation Report as follows:

ìDespite the rise in earnings growth including bonuses ñ driven by private sector services - the balance of supply and demand in the jobs market remains conducive to modest pay rises. Employment growth in the three months to September was insufficient to prevent a small rise in unemployment, and growth in regular pay (excluding bonuses), which is the main determinant of forward wage cost pressure was unchanged.

ìThe latest CIPD/KPMG Labour Market Outlook published earlier this week indicates that pay awards will continue to be modest with workers still unable to match increases in the cost of living. This outcome is also implicit in the Bank of Englandís central inflation forecast as discussed in sensible and balanced fashion in the text of the Bankís latest Inflation Report, in contrast to the remarks of Bank Governor Mervyn King which seemed unduly concerned about pay pressures even though understandably sober about the overall prospects for the economy.

ìThe UK jobs market does not at present pose a serious risk to inflation. By the middle of next year workers and jobseekers will be feeling the effects of the economic slowdown as jobs become harder to finds and real incomes are squeezed still further.î