Wage growth at strongest level for nearly a decade

John-Paul Ford Rojas, business reporter

Pay packets rose by an average of 3.1% in the three months to August, the fastest pace for nearly a decade, according to official figures.

The Office for National Statistics (ONS) also said unemployment fell by 47,000 to 1.36 million while the unemployment rate remained at a 43-year low of 4%.

Pay growth - excluding bonuses - was up from 2.9% in the previous period.

It has not been as strong as 3.1% since the three months to January 2009 and has not been greater since 2008.

The figures look less impressive when taking account of the effect of inflation - in real terms pay rose by just 0.7% over the period, though this was still the best since the end of 2016.

ONS head of labour market David Freeman said: "People's regular monthly wage packets grew at their strongest rate in almost a decade but, allowing for inflation, the growth was much more subdued.

"The number of people in work remained at a near record high, while the unemployment rate was at its lowest since the mid 1970s."

However, Mr Freeman said there was a "notable uptick" in the number of people who were neither working nor looking for a job, particularly among students.

The number of people in employment in fact fell slightly, by about 5,000, to 32.39 million.

It was the first fall in nearly a year, partly explained by the rise by 103,000 of those described as economically inactive to 8.75 million.

The pound rose by about half a cent against the US dollar to $1.32 on the figures.

The better than expected pay figures come after Bank of England chief economist Andy Haldane last week said he saw signs of a "new dawn" for wage growth.

Experts have been puzzled about why earnings increases have been sluggish even though unemployment has been falling sharply.

Pay growth of around 4% was the norm before the financial crisis.

For much of the decade since, British households have been their finances squeezed as wage growth trailed behind price increases.

Consumer prices index (CPI) inflation stood at 2.7% in August and September figures, to be published on Wednesday, are expected to show this slip back slightly to 2.6%.

Employment minister Alok Sharma said: "I am particularly encouraged that wages continue to be on the up, outpacing inflation for the seventh month in a row with regular pay up 3.1% on the year - the fastest growth in almost a decade."

Stephen Clarke, senior economic analyst at the Resolution Foundation, said: "Britain's jobs surge is at last feeding through to higher wages, with pay packets growing at their fastest rate since the financial crisis almost a decade ago.

"This pay momentum is very welcome, reflecting a tight labour market with near record numbers of people in work and unemployment at a 43-year low.

"However, it comes off the back of a truly awful decade for wages that means they remain £12 a week lower than a decade ago."