While the economic recovery appears to have accelerated in Q2, workers are still failing to see the benefits in their pay packets. Annual growth in average weekly earnings fell from 2.2% to -1.7% in April. And while this partly reflected average pay in April 2013 being boosted by some workers delaying bonuses until after the cut in the top rate of income tax, note that the rate excluding bonuses also fell from 1% to 0.4%. We doubt that it will be long, though, before earnings growth picks up. Recent sharp falls in the unemployment rate should begin to enhance workers’ bargaining power, while the 3% rise in the national minimum wage in October will provide further support. So, while a return to pre-recession rates is unlikely soon, pay growth could conceivably reach 2% by the end of this year and 3% at the end of 2015, bolstering the foundations of the consumer recovery.
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