Official figures from the Bank of England have shown salaries rose more than prices in the month of September; the first time average earnings have risen above CPI inflation since the start of the recession.
The figures mark the end of the longest squeeze on living standards in memory, the Bank of England declared, with wages predicted to rise significantly faster than inflation by the end of next year.
Speaking of the Bank’s official figures, Mark Carney said: “We are seeing the start of real pay growth. We expect this pick-up to accelerate. It’s a welcome development”
Since January 2008 average earnings have fallen by 7.5% after inflation, meaning that they are no higher than those in 2003.
The Bank has signalled the beginning of the end to a fall of living standards that has marred the country since 2008, worsened by a series of austerity measures aimed at curbing the national debt. The findings will bring a sigh of relief from many households, especially if the Bank’s predictions of wages climbing at 3.25% by the end of 2015 prove accurate. This would be well above the current forecast of 1.4%.
Paul Hollingsworth, UK economist at Capital Economist, said: “A recovery in real wages looks set to provide support to the economy recovery.”
The Bank’s statement comes after other budget-lightening market changes, such as the price of oil dropping by 20% over the past year, pushing down the cost of petrol and energy bills. Meanwhile, food inflation is also rising at its slowest rate since 2002.
Similarly, hopes for the economy’s recovery have been bolstered by rising employment figures, with a further 112,000 people finding employment between June and September, leading to a new record of 30.8 million.
The Resolution Foundation, a think tank, said the “figures provided more good news on employment, with the pick-up in full-time jobs and fall in youth unemployment particularly welcome.”
However, it also cautioned against excessive optimism, noting that it would take a long time for real wages to recover from their precipitous fall.
“The depth of the six-year pay squeeze is such that we can’t expect average pay to return to its pre-crisis levels until the end of the decade,” Matthew Whittaker, its chief economist said.