UK wages have risen at a record annual rate - 7.3% higher in the three months to May compared to the same period last year.
The wage growth figures released by the Office for National Statistics today are based on average regular pay, not bonuses. The record high rate rises follows fears that inflation could remain stubbornly high and may spark further interest rate rises by the Bank of England.
Workers have been seeking pay rises to keep with the cost of living and rising food prices.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Rise in unemployment
Despite wage growth, unemployment jumped from 3.8% to 4% in the three months to May compared to the previous quarter, hitting pre-pandemic levels. Job vacancies dropped by 85,000 in the period from April to June to 1,034,000, the twelfth consecutive fall, suggesting the job market is slowing.
Redundancies also rose by 0.2% per thousand employees to 3.3% per thousand employees; while this is below pre-pandemic levels, it does point to a weak economy.
Taking inflation into account, real pay was down 0.8% in comparison to a rise in headline wage growth, which means wages are still struggling to keep up with inflation with UK inflation at 8.7% and the cost of borrowing at an all-time high, with interest rates at 5%.
Sarah Coles, head of personal finance at Hargreaves Lansdown said: “Somehow, pay is simultaneously too high for the Bank of England’s liking, and yet too low to keep up with inflation.
“After CPI inflation, real total pay (including bonuses) fell 1.2% and real regular pay (excluding bonuses) fell 0.8%. Wages are closing in on inflation, but we’re still poorer with each passing month.”
Retirees return to the job market
The ONS also revealed that retirees are also increasingly returning to the workforce as they face shortfall in pensions and savings.
This drove a slight increase in employment figures to 76%, up 0.2% from the previous month, but still 0.6% below pre-pandemic levels. Retirees returning to work were predominantly men taking up part-time roles, rather than full-time.
-
Bitcoin price one of the most-asked questions on Alexa - here's how to buy the cryptocurrencyAccording to figures from Amazon, which cover September 2023 to November 2024, pop star Taylor Swift and Bitcoin were named among the most popular Alexa queries of 2024
-
Investing for children this Christmas – five ideasIt might not come with a shiny ribbon, but an investment fund could be the gift that keeps on giving. We share five ideas if you are investing for children this Christmas.
-
UK wages grow at a record paceThe latest UK wages data will add pressure on the BoE to push interest rates even higher.
-
Trapped in a time of zombie governmentIt’s not just companies that are eking out an existence, says Max King. The state is in the twilight zone too.
-
America is in deep denial over debtThe downgrade in America’s credit rating was much criticised by the US government, says Alex Rankine. But was it a long time coming?
-
UK economy avoids stagnation with surprise growthGross domestic product increased by 0.2% in the second quarter and by 0.5% in June
-
Bank of England raises interest rates to 5.25%The Bank has hiked rates from 5% to 5.25%, marking the 14th increase in a row. We explain what it means for savers and homeowners - and whether more rate rises are on the horizon
-
UK inflation remains at 8.7% ‒ what it means for your moneyInflation was unmoved at 8.7% in the 12 months to May. What does this ‘sticky’ rate of inflation mean for your money?
-
VICE bankruptcy: how did it happen?Was the VICE bankruptcy inevitable? We look into how the once multibillion-dollar came crashing down.
-
Would a food price cap actually work?Analysis The government is discussing plans to cap the prices of essentials. But could this intervention do more harm than good?
