UK wage growth outpaces inflation

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Wages grew faster than the rate of inflation at the end of 2016, official figures show.
In the three months to December, wages grew 2.6% on an annualised basis in the UK, according to the Office for National Statistics (ONS).

However, that was slower than the previous period, leading analysts to suggest households could face a “squeeze” on spending later this year.
The ONS also said the jobless rate held steady at an 11-year low of 4.8%.
The number of non-UK nationals working in the UK increased by 233,000 to 3.48 million compared with a year ago.

Household squeeze
“The unemployment rate is now at its lowest in over a decade, but wage growth remains subdued by historical standards,” the ONS said in its commentary.
Wage growth slowed from the 2.8% rate seen in the three months to November.

That still outpaced the rise in household prices, but the gap between them narrowed. Annual inflation as measured by the Consumer Prices Index (CPI) reached 1.8% last month, up from a rate of 1.6% in December.

“We expect real household incomes to be squeezed this year,” said Ian Kernohan, an economist at Royal London Asset Management.

Ben Brettell, senior economist at Hargreaves Lansdown, agreed: “With inflation forecast to hit 2.8% early next year, a deceleration in pay growth could see real wages fall at some stage.”
Record employment

However, Mr Brettell added that the UK jobs market had remained resilient, despite warnings it would be hit by the Brexit vote.
“The UK labour market continues to confound the doom-mongers with its resilience to the Brexit shock,” he said.

The employment rate edged higher to 74.6%, which was a record high, according to the ONS data.
“Continued moderate growth in employment has led to a new high in the total employment rate, while the rate for women has reached 70% for the first time on record,” said ONS senior statistician David Freeman.

UK unemployment fell by 7,000 to 1.6 million people, the ONS found.

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