Earnings growth is trending downwards slowly, according to the latest figures from the Office for National Statistics (ONS). Nonetheless, it remains positive in real terms: against the ONS’ preferred inflation measure of CPIH, total pay rose by 1.6% for the quarter from December 2023 to February 2024 while regular pay rose by 1.9%. In both cases, these figures were last above this level in the quarter from July to September 2021 (when they rose by 3.1% and 2.2% respectively). And earnings growth remains relatively strong in key sectors such as manufacturing and finance and business services. 

Looking at regular pay, which excludes bonuses, annual growth was 6.0% across the whole economy for the period from December 2023 to February 2024, down slightly from 6.1% in the previous three-month period. Regular pay growth in the private sector was at the same level of 6.0%, likewise down from 6.1% the month before. There is some variation in the picture by sector however: growth rates in the public sector (excluding financial services) and manufacturing remain unchanged on the previous three-month period, at 6.0% and 6.9% respectively, although this latter figure indicates comparatively strong growth in the manufacturing sector. Meanwhile regular pay growth in the finance and business services sector is not far behind at 6.8%, up from 6.7% the previous month. In percentage-point terms, the wholesaling, retailing, hotels and restaurants sector has seen the greatest change in annual growth rates (a fall from 7.1% last month to 6.4% for the current three-month period) compared with relatively muted changes in all other subsectors.

The figures for total pay present a similar picture of no or little change in most sectors. Across the whole economy, annual growth in average weekly earnings on the total pay measure remains at 5.6%. The figure for the private sector is likewise 5.6%, down from 5.7% for the previous three-month period. Once again, the wholesaling, retailing, hotels and restaurants sector has seen the greatest change in percentage-point terms with the latest rate showing at 5.2% compared with 5.8% for the period from November 2023 to January 2024. And as with regular pay, changes in all other sectors have been relatively muted, with finance and business services, the public sector (excluding financial services) and manufacturing all showing small increases (of 0.1 or 0.2 percentage points) on the previous month, with small falls in the other sectors.

Average weekly earnings across the whole of the economy rose by 6.1% on the regular pay measure in the year to January 2024. This was down marginally from the rate of 6.2% in the year to December 2023. Total pay, which includes bonuses, rose by 5.6% in the year to January, down from 5.8% in the year to December. The growth rate in average earnings is down from the higher levels seen last year, mainly in response to the lower rate of inflation, but remains relatively strong.

The recent easing in inflation means that earnings are growing once again in real terms. In this month’s release the ONS says that in real terms (adjusted for CPIH inflation), total pay rose by 1.4% and regular pay rose by 1.8% in the year to January 2024. These numbers are the same as those for December 2023. CPIH inflation averaged 4.2% in the year to the three months to January 2024.

Current research by IDR shows that recent pay settlements across the economy have centred on 5%. The difference between this figure and that for average earnings growth – which represents the sum total contribution from basic pay and increases in it, plus bonuses (for total pay), overtime, shift pay and other allowances – is sometimes referred to as ‘earnings drift’. This gap re-emerged after the pandemic following a very lengthy period in which there was little difference between basic pay awards and average earnings growth.

The sector with the highest increase in average weekly earnings was wholesaling, retailing, hotels and restaurants where regular earnings, excluding bonuses, grew by 7.2% in the year to January. This was the same increase as in the year to December. Some pay awards in the retail and hospitality sectors are anticipating the increase in the National Minimum Wage of around 10% from 1 April.

The next highest increase was in manufacturing where average earnings grew by 6.8% in the year to January, followed by finance and business services where the growth rate was 6.6%. The sector with the weakest growth rate in earnings was construction, at just 3.3% in the year to January, down from 3.8% in the year to December. Shorter daylight hours in winter can depress earnings in this sector.

Average earnings growth in the whole of the private sector was 6.1% in the year to January, marginally down on 6.2% in the year to December. In the public sector, the rate of growth was 5.9% in the year to January, the same as the revised figure for the year to December. The ONS said that earnings growth in the public sector was not as high as in recent periods but remains strong.

Average weekly earnings across the whole of the economy rose by 6.2% on the regular pay measure in the year to December 2023. Total pay, which includes bonuses, rose by 5.8% in the year to December. The rate of growth is easing back in response to the fall in inflation. Earnings growth is down from the high level of around 8% seen in summer 2023, but remains strong in comparison to the pre-pandemic trend.

At its height, the inflation rate ran ahead of growth in average weekly earnings. However, in recent months the rate of growth in average earnings has been ahead of inflation, as the latter has come down. The ONS says that in real terms (adjusted for CPIH inflation) total pay rose by 1.4% and regular pay rose by 1.8% in the year to December.

Average earnings growth in the public sector continues to be lower than that in the private sector. Regular pay in the public sector grew by 5.8% in the year to December while the growth rate in the private sector was 6.2%. The ONS says that public sector pay growth is not as high as in recent periods but remains relatively strong.

In the year to December, the sector with the highest earnings growth was wholesaling, retailing, hotels and restaurants where average earnings grew by 7.2%. The next highest was manufacturing where the rate of growth was 6.9%.

The sector with the highest rate of growth is frequently finance and business services, but in the year to December earnings growth in this highest-paid sector dropped back to 6.7%.

The sector with the weakest growth in average earnings was construction, where the regular pay rate was just 3.8% in the year to December.

Research by IDR show that recent pay settlements across the economy have been around the 5% level, which is consistent with average earnings growth of 6% to 7%. However, average earnings reflect all payments made including bonuses, overtime, shift payments, and location allowances. Most private sector companies have pay review dates in January and April and the level of these awards will give an indication of the level of average earnings growth in future months.

All other sectors showed a falling off in earnings growth. For example, the regular pay figures for both finance and business services on the one hand, and manufacturing on the other, showed at 7.0% in the year to November, down from 8.2% the previous month in the case of the former and from 7.4% for the latter. The weakest earnings growth was seen in construction, which posted a regular pay figure of just 4.5%, down from 5.2% previously. Earnings drift – or the difference between basic pay increases and growth in average weekly earnings – is weakest here at a time of the year which tends to see less construction activity than during warmer months. In any case, basic pay increases generally only take place once a year, under a number of different collective agreements in the construction sector, so their influence on the average weekly earnings figures is not uniform. 

Average weekly earnings across the whole of the economy rose by 7.3% on the regular pay measure, in the year to October 2023. This rate of growth was down from 7.8% in the year to September. Total pay, which includes bonuses, rose by 7.2% in the year to October, down from 8.0% in the year to September. The ONS said that ‘growth continues to remain strong but is not as high as in recent periods.’

The rate of growth in average earnings has run ahead of the inflation rate for several months now, as inflation has come down. The ONS says that in real terms (adjusted by CPIH inflation) total pay rose by 1.3% and regular pay rose by 1.4% in the year to October.

Average earnings growth in the private sector continues to run ahead of that in the public sector. Regular pay growth in the private sector rose by 7.3% in the year to October while the growth rate in the public sector was 6.9%. The latest figure for public sector pay growth is among the highest since comparable records began in 2001. Higher pay awards in the public sector this year, compared to previous years, are one of the factors here.

Strong average earnings growth in the private sector continues to be driven by movements in particular sectors such as in finance and business services and in manufacturing. In the year to October, average earnings excluding bonuses rose by 8.3% in finance and business services and by 7.4% in manufacturing, though the trend in both looks to have turned down.

Elsewhere, average earnings rose by 5.2% in the construction sector in October, down from 5.8% in the year to September. Wholesaling, retailing, hotels and restaurants was the only sector in which the rate of growth in earnings was up on the previous month, showing at 7.0% in October, up from 6.6% in the year to September.

An indication of the trend line in earnings growth is provided by the separate ONS/HMRC release based on PAYE data, with real time information. This provides experimental monthly estimates. Early estimates for November 2023 indicate that median monthly pay increased by 5.3% compared with November 2022.

Average weekly earnings across the whole of the economy rose by 7.7% on the regular pay measure, in the year to September. This was down marginally from a rate of 7.9% in the year to August. Total pay, which includes bonuses, rose by 7.9% in the year to September, down from 8.2% in the year to August. The growth rate in average weekly earnings has been close to 8% for several months now, close to the highest rates on record.

The rate of growth in average earnings has been ahead of the inflation rate for several months now. The ONS says that in real terms (adjusted by CPIH) total pay rose by 1.4% and regular pay rose by 1.3% in the year to September.

Comparing growth in average earnings in the private sector and the public sector, private sector regular pay rose by 7.8% in the year to September compared to 7.3% in the public sector. The public sector rate of growth is the highest rate since comparable records began in 2001.

However, comparison of the total pay figures shows growth of 7.7% in the private sector compared with 8.6% in the public sector, mainly because of the effect of one-off payments of £1,500 in the civil service that accompanied comparatively lower basic pay increases than elsewhere. These payments were aimed at alleviating cost-of-living issues for civil servants, many of whom are low-paid.

Strong average earnings growth in the private sector continues to be driven by pay in the finance and business services sector, where the rate of regular pay growth was 9.4% in the year to September, down slightly from 9.6% in the year to August.

One of the highest rates of growth was in manufacturing, at 7.7% in the year to September, down from 8.0% in the year to August and 8.1% in the year to July. These rates of growth are comparatively high, in historical terms, for the manufacturing sector where, prior to the pandemic, earnings were rising at lower rates. The figure of 8.1% was the highest since records began in 2001. (The next highest rate of growth after finance and business services was actually in ‘services’ which as well as merging finance and business services with the public sector also includes sectors which are otherwise not separately delineated, such as telecoms and transportation. This was showing at 7.9%.)

In construction the rate of growth in average earnings was 5.8% in the year to September, down marginally from 5.7% in the year to August. In wholesaling, retailing, hotels and restaurants the rate of growth was 6.6% in the year to September, unchanged on the figure for August.

In recent months there has been a regular pattern to earnings growth by sector, with rates in the finance sector at close to 9.5% and rates in manufacturing close to 8%. Rates of earnings growth in construction have been lower at close to 5.8% and growth rates in retailing have been close to 6.6%. This might change in the coming months but much depends on what happens to the economy, inflation and labour markets generally.

Across the whole of the economy, average weekly earnings grew by 7.8% on the regular pay measure, which excludes bonuses and other one-off payments, in the year to August. This is one of the highest rates of growth since comparable records began in 2001. Total pay, which includes bonuses, increased by 8.1% in the year to August. Recent figures have been boosted by one-off payments as part of settlements in the NHS and civil service.

For the three most recent months, growth in average weekly earnings has been positive when adjusted for inflation. In the latest period, for the three months to August 2023, compared to the three months to August 2022, total pay rose by 1.3% and regular pay grew by 1.1%, when adjusted by the CPIH which increased by 6.7% in the period.

Average weekly earnings in the private sector rose by 8.0% in the year to August, down marginally from 8.1% in the year to July. In the public sector, average weekly earnings grew by 6.8% in the year to August, up from 6.6% in the year to July. This rate of growth in regular pay in the public sector is the highest since comparable records began in 2001.

The highest level of growth in regular pay continues to be in finance and business services. Here the rate of growth in the year to August was 9.6%, up marginally from 9.5% in the year to July.

Strong growth in earnings continues in manufacturing, where the rate of growth was 8.0% in the year to August, one of the highest rates of growth for this sector since comparable records began in 2001.

In the construction sector, average weekly earnings grew by 5.7% in the year to August, up from 5.6% in the year to July.

In the largest industrial sector, and the lowest-paying for the bulk of employees, that of wholesaling, retailing, hotels and restaurants, average weekly earnings rose by 6.6% in the year to August, up marginally from 6.5% in the year to July.

An indication of the trend line in earnings growth is provided by the separate ONS/HMRC release based on PAYE data, with real time information. Early estimates for September 2023 indicate that median monthly pay rose by 5.7% compared with September 2023. However in the release last month, the ONS/HMRC estimate for the year to August was 6.7% compared to the AWE outturn of 7.8%. While the 5.7% estimate for September may be an under-estimate it could also be an indication that earnings growth is slowing, with IDR’s data on pay settlements also showing that the median has begun to trend down.

Across the whole of the economy, average weekly earnings rose by 7.8% on the regular pay measure (excluding bonuses) in the year to July. This level was reached in the year to June and is the highest rate of growth since comparable records began in 2001. Total pay, which includes bonuses, rose by 8.5% in the year to July, up from 8.4% in the year to June. The July figure was boosted by one-off payments in the NHS and to civil servants.

Growth in average earnings is now positive when adjusted for inflation. In the three months from May to July, total pay grew by +1.2% and regular pay grew by +0.6%, when adjusted by the CPIH measure of inflation.

Comparing growth in average earnings in the private sector and the public sector, we see that private sector regular pay growth was 8.1% in the year to July compared with 6.6% in the public sector. This figure for the public sector is the highest since comparable records began in 2001.

However, comparison of the total pay figures show growth of 7.6% in the private sector and 12.2% in the public sector. This much higher figure is because of the effects of one-off bonuses in the NHS and civil service.

The high level of average earnings growth in the private sector continues to be driven by pay in the finance and business services sector, where the rate of regular pay growth was 9.5%, up from 9.4%. In the year to June.

The next highest rate of growth was in manufacturing at 8.1% in the year to July. The ONS says that this rate is one of the highest in this sector since records began in 2001.

Meanwhile, average weekly earnings in construction grew by 5.4% in the year to July, down from 5.8% in the year to June.

In the largest industrial sector and the lowest-paid, that of wholesaling, retailing, hotels and restaurants, average weekly earnings rose by 6.5% in the year to July, up from 6.3% in the year to June.

An indication of the trend line in earnings growth is provided by the separate ONS/HMRC release based on PAYE data, with real time information. Early estimates for August 2023 indicate that median monthly pay increased by 6.7% compared with August 2022. This suggests the potential for a slight dip in average weekly earnings growth when the year to August figures are released in mid-October.

Average weekly earnings across the whole of the economy grew by 7.8% on the regular pay measure in the year to June 2023. This is the highest rate of growth since comparable records began in 2001. Total pay, which includes bonuses, rose by 8.2%, boosted by one-off payments paid in the NHS.

According to calculations by the ONS, annual growth adjusted by the CPIH inflation rate indicates real terms growth of 0.5% in total pay and 0.1% in regular pay.

Comparing average earnings growth in the private sector with the public sector (excluding financial services), we see that in the private sector regular pay growth was 8.2% in the year to June compared with 6.2% in the public sector. However, with one-off bonuses paid as part of the settlements in the NHS, total pay rose by 7.9% in the private sector and by 9.7% in the public sector.

Looking at the large industrial sectors that make up the private sector, the highest rate of growth in regular pay was once again in the finance and business services sector at 9.4%. The next highest rate of growth in the year to June 2023 was in manufacturing, a remarkably high 8.2%, which is the highest rate of growth since comparable records began in 2001.

Average earnings growth in construction was 5.8% in the year to June. In the largest industrial sector and the lowest paid, that of wholesaling, retailing, hotels and restaurants, average earnings rose by 6.3% in the year to June.

Earnings growth remains strong in the private sector, especially in finance and business services, and more recently in manufacturing. Recent pay increases in the public sector have boosted overall earnings for the whole economy. What is the likely trend as we enter the second half of the year? An indication of the trend line in earnings growth is provided by the separate experimental ONS/HMRC release based on PAYE data, with real time information. Early estimates for July 2023 indicate that median monthly pay increased by 7.8% compared with July 2022, suggesting the rate of earnings growth remains strong.

Earnings have continued to grow strongly, according to the latest figures from the Office for National Statistics (ONS), in response to both a continued tight labour market and high levels of inflation. Average weekly earnings across the whole of the economy grew at 7.3% on the regular pay measure in the year to May 2023. Total pay, which includes bonuses, rose by 6.9% over the same period. Currently we are seeing some of the highest growth rates in average earnings outside of the Covid-19 pandemic period, when the figures were distorted by the effects of the furlough scheme and subsequent return to work.

However inflation is still running at relatively high levels, and therefore in real terms (that is, adjusted for inflation) the ONS calculates that average total pay fell by -1.2% and regular pay fell by -0.8%.

The ONS’ sectoral analysis of the figures shows that average earnings growth in the finance and business services sector was greatest at 9.0% on the regular pay measure. This is ahead of inflation on the CPIH and CPI measures, which were 7.9% and 8.7% respectively in the year to May (the latest figures), but behind inflation as estimated by the RPI, which was 11.3%.

Looking at the difference between the private sector overall and the public sector, we can see that private sector earnings growth remained strong, at 7.7% in the year to May, the largest growth rate outside of the pandemic period, while public sector earnings growth was lower at 5.8%, though this is the highest figure for the public sector since November 2001, nearly 22 years ago.

The growth rate in manufacturing was also strong at 7.8%, and according to the ONS is the highest rate for the sector since comparable records began in 2001. In construction, average weekly earnings grew by 6.2%, while in wholesaling, retailing, hotels and restaurants the rate of increase was 5.2%. This more modest figure in the lowest-paying sector of the economy is despite the rise of the National Minimum Wage of 9.7% in April. It shows that earnings growth is not simply a function of increases in basic pay but as an average is also subject to fluctuations in the composition of workforces.

What is the outlook for earnings growth? Are we at a peak or will earnings continue to grow? An indication of the trend is provided by the separate ONS/HMRC release based on PAYE data, with real-time information. Early estimates under this, for June 2023, indicate that median monthly pay increased by 9.7% compared to June 2022. This was up on the figure of 8.4% for May 2023, suggesting that earnings growth could remain strong in the short-term at least.

Growth in average weekly earnings showed strongly in the three months to April, according to the latest data from the Office for National Statistics (ONS), in part as a result of the record increase in the National Living Wage, of 9.7%, which took effect from the first day of the month, as well as the fact that April is the main month for annual pay reviews across the economy. However, continued high levels of inflation have meant that in real terms, growth rates fell yet again.

Across the economy, total average earnings growth was 6.5% in the three months to April, up from 6.1% last month, while regular earnings growth was 7.2%, up from 6.8% previously. According to the ONS, the increase in regular pay is the highest since June 2021, when average earnings growth rose strongly, in part due to base effects following the sharp drop the previous year during the peak pandemic period when many employees were furloughed on reduced pay. However, when adjusted for inflation both series showed falls, of 2.0% for total earnings and 1.3% for regular earnings. Inflation rose by 7.8% on the CPIH measure in the year to April, by 8.7% on the CPI and by 11.4% on the RPI measure. Real-terms growth has been negative since February 2022.

Regular average earnings across the private sector as a whole grew by 7.6% in the year to April, up from 7.1% in the year to March. The equivalent figures for the public sector were 5.6% in each month, in other words no change. Looking at sub-sectors, growth was strongest in finance and business services at 9.2% on the regular series, while manufacturing also showed strongly at 7.0%. According to the ONS, this is the highest regular earnings growth in this sector since 2001.

Fluctuating bonus and one-off payments made for significant differences in some sectors between total earnings growth, which includes the effect of bonuses and one-off payments, and regular earnings growth, which excludes these. April usually marks the close of the traditional bonus season, which normally runs from December to March. But many employers are awarding one-off payments to staff to help with the higher cost of living, in addition to annual basic pay increases, many of which take effect in April.

The fluctuations have had a particular effect in construction, where total earnings growth rose sharply on the previous month’s figures – 4.8% in April compared to 4.0% in March on the headline three-month measure and 6.1% on the single-month series, up from just 2.8% in March – but regular earnings growth, while stronger than for total earnings, was down: to 6.4% in the three months to April, from 6.5% in March, and with the single-month figure for April showing at 5.8%, in contrast to March’s 7.0%.

The picture for wholesale, retail, hotels and restaurants was similar, with total earnings growing by 3.6% in the year to April, the same as last month, but regular earnings grew by a greater factor, of 5.1%, up from 4.5% in March. This sector contains the largest number of lower-paid employees and the stronger showing by regular earnings growth is probably due in part to the implementation of the NLW increase.

Average earnings growth remains strongly positive. In the year March 2023, whole economy regular pay, which excludes bonuses, rose by 6.7%, up marginally on 6.6% in the year to February. This rise is amongst the highest outside of the coronavirus pandemic period, according to the ONS. Total pay rose by 5.8%, and this measure was lower than the regular pay measure because of larger bonuses paid in the previous year.

However, while average earnings growth remain strong, the negative effect of high inflation is even stronger. The CPIH, which is the ONS’ headline measure of inflation, was showing at 9.2% in the year to March. Therefore the ONS calculates that in real terms, adjusting for inflation, total pay fell by 3% and regular pay fell by 2% in the year to March.

In the last few months, the gap between the rates of growth in average earnings in the private sector and the public sector has narrowed. In the latest figures, the rate of growth in regular pay in the private sector was 7% (up from 6.9% in the year to February) while that in the public sector was 5.6% (up from 5.3% in the year to February). The rate of growth in the public sector is the highest since 2003.

By sector, the strongest earnings growth in the latest figures are in finance and business services, where the increase in regular pay was 8.8% in the year to March. This was up from 8.3% in the year to February.

The rate of growth in manufacturing was also stronger, at 6.3% in the year to March. This was higher than in the year to February when the increase was 5.8%.

The rate of growth in regular pay in construction was 6.2% in the year to March, unchanged on the rate of growth in the year to February. However, bonuses in construction in March 2023 were much lower than in March 2022, so total pay in the sector rose by just 3.7% in March 2023.

The weakest rate of growth in average earnings was in wholesaling, retailing, hotels and restaurants, where the increase was 4.4% in the year to March, down on 4.9% in the year to February. This weaker rate of growth comes in a sector where the labour market in retailing and hospitality remains very competitive. Many food retail companies have paid more than one increase to staff in the past year, in an effort to compete with other retailers for staff, but these ‘leapfrogging’ moves have not been sufficient to overcome weak earnings growth across the sector as a whole. This is the lowest-paying of all the industrial sectors and earnings here will have received a boost in April when the latest rise in the National Minimum Wage, worth nearly 10%, came into effect. This will not be seen in the AWE series until next month’s figures, those for the year to April, are released.

An indication of the trend line in average earnings growth is provided in the joint HMRC-ONS release on PAYE data, with real time information. Early estimates for April 2023 indicate that median monthly pay increased by 7.4%, compared with April 2022. This would suggest that the trend in earnings is set to remain strong.

In recent months the difference between the rates of growth in average earnings in the private sector and the public sector has narrowed. In the latest figures, for the year to February 2023, the rate of growth in regular earnings in the private sector was 6.9% and the rate of growth in the public sector was 5.3%,a gap of just 1.6 percentage points.

Growth in average earnings in the private sector remains strong, boosted over the past year by companies paying additional increases outside of the annual cycle and paying one-off lump sums to staff as compensation for the high cost of living. However, the current figures for the private sector in the three months between December 2022 and February 2023 are slightly distorted as a consequence of very high bonus payments in December 2021 that were not repeated in December 2022. This has led the ONS to place greater emphasis in its release on the regular pay series which excludes bonuses.

The rate of growth in average weekly earnings in the public sector is the highest since July 2005, outside of the statistical aberrations of the pandemic period. The rate of 5.3% for February is up on 4.8% in January and 4.2% in December. The current pay disputes are over pay awards that are largely due to take effect from April. Exactly when they show up in the AWE figures, though, will depend on when they are agreed.

The strongest earnings growth in the current figures are in finance and business services, where the increase in regular pay was 8.3% in February, up from 7.7% in January. This is followed by the construction sector where the increase was 6.2% in the year to February, up from 5.8% in the year to January. In the manufacturing sector average earnings also rose, by 5.8% in the year to February, up from 5.4% in the year to January.

The exception to this rising trend was in wholesaling, retailing, hotels and restaurants where the rate of growth in earnings dropped back to 4.9% in the year to February, from 5.3% in the year to January. This is the lowest-paying of all the industrial sectors and earnings here will receive a boost in April when the latest rise in the National Minimum Wage, worth nearly 10%, comes into effect. Earnings in this large sector have risen in the past year as a consequence of big companies paying increases in addition to annual pay rises. The labour market for staff in retailing and hospitality remains very competitive.

An indication of the trend line in average earnings growth is provided in the separate ONS release based on PAYE data, with real time information. Early estimates for March 2023 indicate that median monthly pay increased by 6.3% compared with March 2022. Given that the ONS calculates that whole economy regular average earnings rose by 6.6% in the year to February, it would appear that the trend in nominal earnings at least is set to remain strongly positive.

In the year to January 2023, average regular pay growth was 7.0% in the private sector and 4.8% in the public sector. The overall impression of average earnings growth from the latest figures suggests a fairly stable picture for private sector pay but a higher growth rate in the public sector. However, total pay growth in the private sector is distorted by exceptional bonus payments in December 2021 which were not repeated in December 2022. As a consequence, in the annual measure of average earnings in November 2022 to January 2023 compared with the same quarter a year ago, total pay in the whole economy rose by 5.7%, while regular pay rose by 6.5%.

Looking at the main industrial sectors that make up the private sector, average earnings on the regular pay measure rose by similar levels in the year to January compared with the year to December. In the finance and business services sector, average earnings rose by 7.7% in the year to January compared to 7.4% in the year to December. In construction, average earnings rose by 5.8% in the year to January compared to 6.1% in the year to December. In manufacturing, average earnings rose by 5.4% in the year to January compared to 5.5% in the year to December. In wholesaling, retailing, hotels and restaurants earnings rose by 5.3% in the year to January compared to 6.0% in December.

Some higher pay awards combined with backpay arising from late pay settlements have pushed up earnings growth in the public sector. Both total pay and regular pay grew by 4.8% in the year to January up from 4.2% in the year to December and 3.3% in the year to November. The ONS said that this was the largest rate of pay growth for the public sector (outside of the Covid period) since the winter of 2005/06, when the rate was 5.2%.

Early indications of the trend in earnings growth into February 2023 come from the separate PAYE-based analysis of payrolled employees, also published in the ONS release. This reports that early estimates indicate that median monthly pay rose by 6.7% in February compared with a year ago.

Taken in the round, the trends in earnings suggest continuity in the private sector compared with a higher rate of growth in the public sector. The higher growth rate in the public sector will buoy up the overall whole economy trend rate. The very high bonus payments in the finance and business services sector in December 2021 will drop out of the annual comparison in coming months. In the meantime, March is normally the peak month for bonuses and March 2023 is anticipated to be a bumper month.  

Average weekly earnings in the whole economy strengthened in the three months to December 2022 to 6.7% compared to December 2021, based on the regular pay measure, which excludes bonuses. This was up from 6.5% in November 2022.The year-on-year total pay measure, which includes bonuses, was lower at 5.9% because December 2021 saw very high bonus payments in the finance sector but these were not repeated in December 2022. The ONS said that regular pay growth was now showing at the strongest rate seen outside of the coronavirus pandemic period.

 The ONS usually emphasises the regular pay figure in its releases, and while we would normally highlight the broader picture provided by the total pay measure, on this occasion – because of the distortion produced by the bonus comparison – the former produces a clearer indication of the current trend for earnings growth.On the regular pay measure, private sector earnings growth was 7.3% in the year to December and public sector earnings growth was 4.2%. The slightly higher rate of growth in the public sector reflects late pay settlements from last year finally reaching salaries. On the total pay measure, private sector earnings growth was 6.4% in the year to December and public sector earnings growth was 4.3%. Very few employees in the public sector receive bonuses and as a result there is usually much less difference between regular pay and total pay.

Early indications of the trend in earnings growth into January 2023 come from the separate PAYE-based survey of payroll employees, referenced in the ONS release but published separately. Estimates from this indicate that median monthly pay increased by 6.8% in January 2023 compared with January 2022.

Average earnings growth is fairly strong across all the main industries of the private sector. Regular earnings grew by 7.4% in the finance and business services sector. In construction, average earnings grew by 6.1% in the year to December. In manufacturing the increase was 5.5% while in wholesaling, retailing, hotels and restaurants the latest rise was 6.0%.

The ONS also estimates how average earnings growth compares with inflation. Its preferred measure of inflation is the CPIH which includes a housing costs component, albeit one based on private sector rents rather than mortgage interest payments. The rate of growth in inflation on the CPIH measure was 9.2% in the year to December. Therefore in real terms (that is, adjusted for inflation) total pay across the economy was down -3.3% in the year to December and regular pay was down -2.5%. Using this methodology, we can estimate that public sector earnings were down by -5% in the year to December.

Strong earnings growth in the private sector reflects the strength of the labour market despite the economic situation, which is one of extremely weak growth combined with inflation, or ‘stagflation’. Employment remains strong and vacancy levels are high. Those employees with key skills are in demand. These factors, along with the inflation backdrop, form the main backcloth to the average earnings growth shown in the latest official figures.