The growth in employee annual earnings in Great Britain has fallen below 5% for the first time in more than two years, closing the gap between wages and inflation.
Staff pay, excluding bonuses, rose by 4.9% in the three months to August compared with the same period a year earlier, down from 5.1% in the three months to July, according to the Office for National Statistics.
Annual growth in total earnings including bonuses was 3.8% in the three month to August, down from 4.1% for the equivalent figure in July.
The fall is likely to be seen as a significant milestone in the return to normal levels of earnings growth by the Bank of England and a spur to bring down interest rates at a faster pace.
However, the ONS said the data was volatile, and especially after a series of one-off bonuses awarded to NHS and civil service staff last year that had fallen out of the annual statistics, dragging down the figures for total earnings by more than would be expected.
In a further sign of weakness in the labour market, the unemployment rate – which covers the whole UK – nudged down to 4% in the June to August period, while vacancies fell almost back to the long-term average experienced before the onset of the Covid-19 pandemic.
Jake Finney, an economist at PwC UK, said; “The softening in demand for labour is starting to weigh on wage growth.
“A quarter-point cut in November still seems most likely, given signs that wage growth is moderating and increasingly dovish commentary from Bank of England governor Andrew Bailey.”
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Earlier this month Bailey had suggested that the central bank could cut interest rates more aggressively if data showed the economy was slowing.