After months of large pay packets and high employment, the economy has illustrated its unpredictable nature and wages have taken a nosedive. According to new data from the Office for National Statistics (ONS), wages suffered its first decline in over a year as figures fell to 2.8 percent.
Employment remains at a record high, with over 146,000 jobs added to the economy in first few months of the year. The resulting combination of low wages and low unemployment could leave many consumers stuck in low-paid jobs but with limited opportunity to pursue alternative employment. On account of the high employment, the amount of open vacancies has diminished. This could further dampen consumer confidence and increase pressure on ever-suffering retailers.
At the Credit Protection Association, many of our Members have been hit hard by economic dips, and have struggled to recoup the loss to their cash flow. We urge all our Members to prepare for all eventuality, saving enough cash to recover from economic slowdowns as well as having enough to take advantage of the good.
Economists said the latest figures reduce the chances of a near-term increase in interest rates.
HSBC’s UK economist, Elizabeth Martins, said: “The market is pricing in just a 4% chance of a rate rise at the Bank of England’s 21 June meeting, so any change to policy would be a big surprise… at this point, the market sees around a 50% chance of an August hike.”
Since the financial crisis, lack of investment in new machinery and technology to help firms perform better punched a hole in economic performance.
The public sector pay freeze followed by the 1% pay cap has also weighed on the overall numbers.
Some economists also argue that a lack of bargaining power – union membership has been in long term decline – is leading to fewer widespread agreements on earnings increases.