Wages ticking up
In the first quarter of this year UK unemployment fell to the lowest level since 1974. Against a backdrop of sluggish economic growth this is quite an achievement. Low unemployment levels are helping to boost people’s earnings as spare capacity in the labour market dries up, which is good news for those trying to save up for a home. Currently there are 1.5 unemployed people per job vacancy, significantly down from a peak of 5.7 back in the middle of 2009, and with fewer people available to fill the advertised jobs, it’s finally putting pressure on wage growth.
Incomes are currently rising by 3.2% year-on-year, significantly higher than the 1.8% growth recorded two years ago. The good news is that wages are outpacing inflation too, meaning households should have a bit more money left in the bank at the end of the month. In fact, real incomes (after adjusting for inflation) are rising around 1.4%, up from 0.6% in March 2018 and significantly higher than -0.5% in March 2017 when inflation was really biting into household incomes. As a result, real pay is rising at the fastest rate since the beginning of 2016 - which is good news for households.
Since 2008 house prices have risen considerably more than incomes, and this has really squeezed affordability and put purchasing a home out of reach for many. But over the last nine months incomes have risen faster than house prices in Great Britain, following a period of 67 months (5.5 years!) where house price growth outpaced earnings growth. So now the tables have turned it’s a welcome boost to those looking to purchase a home by helping
them save up a little faster, but even more so, it’s a welcome boost to the economy too and should help support future economic growth.
Real Wage Growth