Wages have been rising at a record speed according to official data, fuelling fears that inflation could remain at a high level and force the Bank of England (BoE) to raise interest rates further.
New data released by the Office for National Statistics (ONS) on Tuesday shows that employees’ regular pay, not including bonuses, was 7.3 percent higher in March to May 2023 than during the same period a year earlier.
The ONS also revealed that unemployment rose unexpectedly over the quarter, jumping to 4 percent from 3.8 percent in the previous quarter.
Meanwhile, employment levels also grew as the number of people recorded as economically inactive declined, with the number of those not working due to long-term sickness dipping for the first time since last year.
ONS director of economic statistics Darren Morgan said: “Total employment grew in the latest three months while the number of people actively looking for work also increased, both driven by men rejoining the labour market.
“Pay excluding bonuses has again risen at record levels in cash terms.
Wage Inflation
Talking to LBC radio on Tuesday, Work and Pensions Secretary Mel Stride said the government is taking a “firm and robust approach” to public sector pay to rein in wage inflation.He said: “Domestic wage pressure is a key component of the stickiness of inflation, but that’s why it’s so important that the government takes a relatively firm and robust approach to public pay settlements and there’s no way, unfortunately, that we can duck that because if those settlements are too high that will feed into those problems.
“We’ve got to make sure that those wage pressures are moderated to the extent we can.”
UK inflation hit a 41-year high of 11.1 percent in October and has been slower to fall than in other big economies. Last month the BoE unexpectedly raised its key interest rate by half a percentage point to 5 percent, after inflation held at 8.7 percent in May.
On Monday, BoE governor Andrew Bailey and Chancellor of the Exchequer Jeremy Hunt joined forces to call for wage restraint.
“Both price and wage increases at current levels are not consistent with the inflation target,” Mr. Bailey told finance executives at the City of London’s annual Mansion House dinner.
Mr. Hunt said he and Mr. Bailey would do “what is necessary for as long as necessary to tackle inflation” and return it to the central bank’s 2 percent target.
‘Dismal’
Commenting on the new ONS data, the chancellor said: “Our jobs market is strong, with unemployment low by historical standards.“But we still have around one million job vacancies, pushing up inflation even further.
“Our labour market reforms—including expanding free childcare next year—will help to build the high-wage, high-growth, low-inflation economy we all want to see.”
Opposition parties criticised the government’s record of economic management.
Labour’s shadow work and pensions secretary Jonathan Ashworth said: “These figures are another dismal reflection of the Tories’ mismanagement of the economy over the past 13 years.
“Britain is the only G-7 country with a lower employment rate than before the pandemic and real wages have fallen yet again—just as more and more families feel the devastating impact of the Tory mortgage bombshell.”
Liberal Democrat Treasury spokesperson Sarah Olney said: “Month after month we see people’s pay being relentlessly squeezed by inflation and it’s all down to this government’s failure to manage the economy. With inflation spiralling, the Conservatives need to do more to get a grip on the economy that they’ve left in tatters.”
