The latest average weekly earnings (AWE) figures show a slight fall back across all parts of the private sector, with only the construction sector bucking the trend, showing modest growth after a long period of stagnation. Overall, growth in the whole economy earnings figures in the three months to August was 2.8 per cent, compared to a year earlier, down from 2.9 per cent in July.

Meanwhile, the total number of unemployed people increased by 114,000 over the quarter to August 2011 to reach 2.57 million. The number of people in employment fell by 178,000 on the quarter to August to 29.10 million, with a dramatic fall of 175,000 in the number of people working part-time.

On top of these very negative labour market figures we have leading economic commentators saying that economic growth has ‘stalled’. Stagflation is the term used when an economy stalls but inflation remains high. RPI inflation was 5.2 per cent in August, pushed up by huge increases in gas and electricity prices. A new report from the National Institute of Economic and Social Research says the economy ‘is effectively stalled now’ and says that ‘this recovery will be the weakest of any since the end of WW1’.  

Total average weekly earnings in the private sector rose by 3.0 per cent in the year to August compared to growth of 1.7 per cent in the public sector. Much of the strength in the earnings growth in the private sector is still being driven by comparatively high earners in the finance and business services sector where total pay rose by 6.2 per cent and regular pay (excluding bonuses) rose by 4.1 per cent. Pay awards for most employees in finance this year have been between 2 and 3 per cent (IDSPay.co.uk).

Elsewhere in the private sector, AWE earnings growth rose in construction and fell back in manufacturing and in wholesaling, retail, hotels and restaurants. In the year to August earnings in construction rose to 2.2 per cent, up from 1.6 per cent in the year to July. This recent pick-up follows a year in which pay growth in construction was largely in negative territory.

Earnings growth in manufacturing dropped back to 1.5 per cent in August from 1.7 per cent in July. While both IDSPay.co.uk and the EEF have measured pay settlements in manufacturing at 2.5 to 3 per cent, lower earnings growth on the AWE measure may be coming from a decline in overall activity which weakens any contribution to earnings from overtime, shift and bonus payments.

The AWE earnings growth figures for the wholesaling, retailing, hotels and restaurants sector was 2.0 per cent in August, down from 2.6 per cent in July. Looking at the medium-term trend the earnings figures have been higher in recent months than the rather low figures in 2010. The sector is the largest in the whole economy with 23 per cent of total employment. Average weekly earnings for the sector are the lowest of all the sectors, standing at £299 a week in August. Previously, the growth in part-time work was exerting a downward pressure on the ‘average’ being earned in this sector, but the recent collapse of part-time work in the economy has possibly exerted an upward pressure on the average in both retailing and also, partially, in the public sector with job losses among school support staff and other roles in local government.