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UK Annual Earnings to Rise Above Inflation in 2015

British wages will rise above inflation throughout 2015 for the first time in eight years but “boom time” pay increases remain a distant prospect, according to a study.

A special report on the labour market from the Ernst & Young ITEM Club predicts a pick-up in pay growth to 1.9% this year, delivering the first increase in real earnings since 2007, amid low inflation. Inflation has hit a record low of 0.3% and is expected to turn negative in coming months.

However, while pay growth will continue to accelerate in coming years, it will remain short of the pace achieved in the decade before the financial crisis. Wages are forecast to grow by 3.7% in 2018, still 0.7% short of the pre-crisis average.

Martin Beck, senior economic advisor to the EY ITEM Club, said: “Real earnings have fallen by nearly 10% since 2008, but workers will finally see more money in their pockets this year.

“However, this is not a normal recovery. The move towards later retirement and the huge increase in the size of the workforce has depressed real wages as workers have priced themselves into jobs. We don’t expect a return to boom time wage growth any time soon. Employment will continue to be strong, but wage growth will remain relatively modest.”

via The Guardian [1]

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Alfonso Esparza

Alfonso Esparza [6]

Senior Currency Analyst at Market Pulse [7]
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza