The pace of basic wage growth accelerated to a record high in the 12 months to April, according to the latest official employment figures that lock in the prospect of further interest rate increases.
The Office for National Statistics (ONS) said average earnings, excluding bonuses, grew at 7.2% over the 12 months - up from the 6.7% recorded in March and higher than the 6.9% forecast by a Reuters poll of economists.
While that figure is still below the rate of inflation, it represents an improvement for household spending power given that the consumer prices index (CPI) measure of inflation eased sharply to 8.7% in April.
The wider employment figures also showed a surprise fall in the unemployment rate to 3.8% when an increase to 4% had been expected by experts.
That was mainly down to a 250,000 increase in employment over the three months to April.
ONS director of economic statistics, Darren Morgan, said: "With another rise in employment, the number of people in work overall has gone past its pre-pandemic level for the first time, setting a new record high, as have total hours worked.
"The biggest driver in recent jobs growth, meanwhile, is health and social care, followed by hospitality.
"While there has been another drop in the number of people neither working nor looking for work, which is now falling right across the age range, those outside the jobs market due to long-term sickness continues to rise, to a new record.
"In cash terms, basic pay is now growing at its fastest since current records began, apart from the period when the figures were distorted by the pandemic.
The better than expected wage figures can be partly explained by increases to minimum wage levels, of up to almost 10%, that came into effect in April.
The government agreed the increases to help the lowest-paid combat the cost of living crisis.
However, Bank of England rate-setters want to see the ONS wage figure fall rather than rise, and would be expected to cite the data as a reason to hike Bank rate again when it meets next week.
There have been 12 consecutive rate increases to date to help combat inflation.
Governor Andrew Bailey has spoken often of fears that wage increases to offset the rate of inflation can fuel the pace of price growth - inflation - by boosting demand in the economy.
Such an economic argument has been dismissed by trade unions seeking improved pay deals in both the public and private sectors.
The hikes in Bank rate are largely responsible for wider borrowing costs, such as mortgages, going up with the UK boss of HSBC telling Sky News on Monday that there is no sign of fixed rate costs starting to go back in the right direction because inflation has proved so "sticky".
Mortgage providers have been temporarily pulling deals to account for rising interest rate expectations.
The Bank had already been widely expected to raise the rate next week given rising core inflation - a measure that strips out volatile elements such as food and energy.
It is seen as the best indicator of how ingrained inflation has become in the UK economy.
Economists and financial markets expect a 0.25 percentage point hike to Bank rate next Thursday, taking it to 4.75%.
But a third of market participants are now betting that the monetary policy committee (MPC) will go even further.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said there was evidence to suggest that the changes to the minimum wage rules in April will have distorted the wage figures and policymakers were likely to look beyond them.
"We think that year-over-year growth in average weekly wages will slow to about 5% by the end of this year, on course for a 3.5% rate in 2024.
"We remain unconvinced, therefore, that the MPC will need to increase Bank Rate all the way to 5.5% by the end of this year, as markets expect.
"A 5% peak still looks more likely to us."
https://news.google.com/rss/articles/CBMiZGh0dHBzOi8vbmV3cy5za3kuY29tL3N0b3J5L2xlYXAtaW4tYmFzaWMtd2FnZS1ncm93dGgtdG8tNy0yLWJvb3N0cy1ob3VzZWhvbGQtc3BlbmRpbmctcG93ZXItMTI5MDA5NjnSAWhodHRwczovL25ld3Muc2t5LmNvbS9zdG9yeS9hbXAvbGVhcC1pbi1iYXNpYy13YWdlLWdyb3d0aC10by03LTItYm9vc3RzLWhvdXNlaG9sZC1zcGVuZGluZy1wb3dlci0xMjkwMDk2OQ?oc=5
2023-06-13 07:18:45Z
CBMiZGh0dHBzOi8vbmV3cy5za3kuY29tL3N0b3J5L2xlYXAtaW4tYmFzaWMtd2FnZS1ncm93dGgtdG8tNy0yLWJvb3N0cy1ob3VzZWhvbGQtc3BlbmRpbmctcG93ZXItMTI5MDA5NjnSAWhodHRwczovL25ld3Muc2t5LmNvbS9zdG9yeS9hbXAvbGVhcC1pbi1iYXNpYy13YWdlLWdyb3d0aC10by03LTItYm9vc3RzLWhvdXNlaG9sZC1zcGVuZGluZy1wb3dlci0xMjkwMDk2OQ
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