The median basic pay increase has therefore fallen from 3.5% through the first quarter of the year, to 3.2% in the second quarter of 2008.

Key public sector pay deals are helping to keep the headline figure for the whole economy subdued. If we exclude these from our analysis, we find that the median pay award in the private sector alone is 3.4% in the three months ending June 2008. Such deals include the 2.75% increase paid to 1.3 million NHS workers, and a 2.6% rise for 174,780 members of the armed forces.

With the median pay rise standing at 3.2%, and retail prices index inflation rising to 4.6%, pay rises are running at 1.4 percentage points below RPI inflation. Pay rises have not stood this far below inflation since October 1990 (when the IRS median pay settlement stood at 9.1% against inflation at 10.9%).

We expect the rise in unemployment (13,000 increase in the quarter to May 2008), coupled with the economic slowdown, to keep pay growth subdued over the remainder of the year. The Bank of England will also continue to keep a close eye on pay settlements. But with pay bargaining slowing through to the year end, the January to April 2009 pay period will provide the next set of robust data on how wage rises have reacted to other factors.

• If your organisation has recently settled its annual pay award, and you would like to contribute to our monthly analysis of pay trends, you can submit details of your organisation's latest settlement for inclusion in the IRS pay databank by completing the online form.