The latest average earnings (AWE) figures from the ONS show private sector earnings dropping back to 2.0 per cent in November 2011, down from 2.4 per cent in September and 2.9 per cent in July. The weakening economy has brought weaker earnings growth, although growth rates vary by sector, with the finance and business services sector still playing the lead role.

Total average weekly earnings (including bonuses) in finance and business services rose by 3.2 per cent in the year to November, down on the higher rate of 5.8 per cent in August and 6.8 per cent in March 2011. Regular pay in the finance and business services sector (which excludes bonuses) rose by 3.5 per cent in the year to November, with bonuses having less of an effect on total pay this month.

The whole economy average earning rate was 1.9 per cent in the year to November. While pay growth in the private sector was 2.0 per cent, in the public sector (excluding the nationalised banks) the rate of growth was down to 1.4 per cent. Earnings growth in the private sector has run ahead of the public sector for the whole of 2011. In the summer months, earning in the private sector ran at 2.9 per cent as against 1.5 per cent in the public sector, almost twice the rate.

In the largest sub-sector of the economy – covering wholesale, retail, hotels and restaurants (with 23 per cent of all employees) – earning growth in the year to November was 1.7 per cent, up from 1.4 per cent in October. This sector had very subdued and even negative earnings growth in 2011. The National Minimum Wage rose by 2.5 per cent in October 2011, and although those paid at the minimum received rises of 2.5 per cent, it seems many employees further up pay structures received lower percentage rises or had pay frozen.

Elsewhere in the private sector, average weekly earnings growth remained subdued at 1.5 per cent in November, up from 1.3 per cent in October, but down on 1.7 per cent in August. A year ago the rate of growth was 3.6 per cent. Pay settlements of between 4 and 5 per cent in the car industry are clearly being offset by lower pay settlements in less successful parts of manufacturing.

Earnings in construction continued to show positive growth, at 2.0 per cent in November, after two years or so when earnings growth was either non-existent or negative.

Commenting on pay and prices in 2011, The Office for Budget Responsibility (OBR), in its 29 November 2011 report, said: ‘Real household disposable income is forecast to have fallen by 2.3 per cent this year, a post-war record. Earnings growth is not expected to overtake inflation again until 2013 and not by a significant margin until 2014. As a result, we expect consumer spending to remain broadly flat in real terms next year before picking up as real household disposable income starts growing again.’