Although inflation drops to 8.5%, prices are still very high. Here is a possible future for the economy.

The most recent official figures show that pay has continued to lag behind the rising cost of living.

Even while the average wage increased by 4.7% between April and June, inflation, which is expanding at a much faster rate, surpassed that growth.

The “actual value” of wages thus decreased by 3%, per the Office for National Statistics.

Rising energy expenses, as well as increasing prices for food and fuel, are taking a toll on household finances.

The UK’s inflation rate has reached a 40-year high as a result of the price increase. On Wednesday, the most recent inflation rate is expected to be higher.

Since statistics have been kept more than 20 years ago, the difference between pay growth and inflation is at its widest.

The “actual worth” of salary, according to Darren Morgan, director of economic statistics at the ONS, is declining. Without bonuses, he noted, “it is still declining faster than at any other point since comparable statistics began in 2001.”

The data also showed a discrepancy in salary increases between the public and private sectors.

The “biggest disparity we have seen for 20 years,” according to Mr. Morgan, is between the 5.9% wage rise in the private sector and the 1.8% pay growth for those employed in the public sector.

Workers and unions have been calling for salary increases as a result of the rising cost of living, and some industries, like the train sector, have recently engaged in strike action.

This Thursday and Saturday, more than 40,000 railroad employees who are RMT union members are scheduled to go on strike, but disruption is also anticipated on Friday because it might take some time for business as usual to resume.

Millions of public sector employees, including teachers, nurses, physicians, police officers, and members of the military forces, will receive salary increases, the administration said last month.

The majority of pay raises, however, were below the current inflation rate of 9.4%, as ministers argued that substantial raises could make inflation stay higher for longer.

In an effort to contain increasing prices, the Bank of England recently increased interest rates by the biggest level in 27 years, at 1.75%. The UK economy will enter a recession at year’s end, the report added, as gas and electricity prices keep rising.

Senior economist at the Resolution Foundation Nye Cominetti claimed that Britain was currently experiencing the worst pay squeeze since the Queen’s Silver Jubilee in 1977.

Because of the effects of the furlough system from the previous year, she added, “The amount of this pay suffering is even worse than official data show too.

The fact that the average income increase still isn’t enough to keep up with price increases speaks something about how extreme inflation is.

What happens with inflation over the coming year will be crucial right now. Pay increases might once more be more than price increases if price inflation slows down as anticipated. That improves the living conditions of the workforce.

The Bank of England will be concerned that increased pay will itself turn into an expense that drives inflation and that pay will have to increase even more to make up for that – the feared “wage-price spiral” – so that inflation takes considerably longer to return to the 2% target.

Expect an increase in interest rates in September; it may be more than a quarter point.

Government officials are aware that consumers are “struggling with rising prices,” according to Julie Marson, minister at the Department for Work and Pensions.

One of the best ways for people to succeed is to have steady job, but as part of our £37 billion package of support to help with living expenses, we also offer direct payments of $1,200 to millions of low-income households.

Separately, the ONS also disclosed that job openings declined in the most recent quarter for the first time since 2020. They decreased by 19,800 to 1.274 million between May and July.

The ONS notes that although though vacancies reached a record low between April and June 2020 during the early stages of the Covid epidemic, they have since climbed by 945,000.

Overall, according to the ONS, the unemployment rate remained at 3.8%, while the employment rate for those between the ages of 16 and 64 slightly declined to 75.5%.

Finding Employees is a Hassle.

The “overall image” in the labour market, according to Neil Carberry, chief executive of the Recruitment & Employment Confederation, is “still good for those looking for work or to shift jobs to enhance their compensation.”

However, he argued that businesses were still having trouble finding enough employees, which would “constrain growth and boost inflation.”

One of many company owners having trouble filling positions is Louise Juggins, proprietor of the Crow Bar in Felixstowe. She claims that this has affected her summer business.

If we served food seven days a week and I had more staff, we could put the facilities out there, she added, and we could definitely be taking more than we are.

We don’t currently set tables on Mondays and Tuesdays, only because I don’t have the staff to do so.

According to Trevor Mangan, owner of TJ Painting and Decorating in Alton, “finding quality individuals is an utter headache; there is so much work that people don’t want to spend the time learning the craft.”

“I just don’t have the personnel I trust to handle it, therefore I can’t take on the more job,” a small business owner laments.