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UK wages rose more than expected, hitting a record high in the three months to June, according to official data, likely adding to the Bank of England’s concerns about rising inflationary pressures.
According to statistics, from April to June, the annual growth rate of regular wages (excluding bonuses) was 7.8% data Released by the Office for National Statistics on Tuesday. It was the highest regular annual growth rate since comparable records began in 2001, and it was the first time in more than a year that it pushed nominal wages above price growth.
Average total employee wages, including bonuses, grew at an annual rate of 8.2% in the three months to June, up from 7.2% in the three months to May and the largest annual increase outside of the coronavirus pandemic .
The annual increase in total wages was impacted by the government’s one-off bonus to NHS staff in June, but both key measures of wage pressure far exceeded analysts’ expectations.
Economists polled by Reuters had forecast total wages and regular wages rising 7.3 percent and 7.4 percent, respectively.
The Bank of England’s Monetary Policy Committee carefully watches wage growth and labor market data for signs of persistent price pressures. The wages data came in above expectations and market expectations for a 0.25 percentage point rise in September jumped to 99%.
Unemployment unexpectedly rose, inactivity fell and payrolls fell despite clear signs of continued loosening in the labor market.
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Ruth Gregory, deputy chief UK economist at consultancy Capital Economics, said the acceleration in wage growth “supports our view that the Bank of England will raise interest rates by 25% before the tightening cycle ends. basis point”.
She added that interest rate expectations could change following the release of July inflation data on Wednesday, with analysts forecasting a sharp slowdown in consumer price growth to 6.8% from 7.9% in June.
Grocery prices rose 12.7 percent in the four weeks to Aug. 6, down 2.2 percentage points from the previous month, according to separate data from research firm Kantar released on Tuesday.
GBP/USD was up 0.16% on the back of the labor data. Markets have also increased the likelihood that the Bank of England will raise interest rates to 6% by the end of the year from the current 5.25%.
Data on Tuesday showed no sign of an expected slowdown in private sector wage growth. Average annual private sector regular wage growth was 8.2% in the three months to June, the largest annual increase outside of the Covid-19 period.
Annual growth in regular wages outpaced price gains for the first time since March 2022 as inflation moderated, up from a 3.1% contraction in the three months to February.
Nye Cominetti, an economist at the Resolution Foundation, a think-tank, said the figures marked the end of Britain’s “painful wage crunch”. While incomes ended up higher than they were before the 2008-09 global financial crisis, he said “15 years of stagnation cost the average worker £230 a week and made Britain a much poorer country”.
Employment Minister Guy Opperman (Guy Opperman) said Tuesday’s figures showed “our labor market continues to show strong strength, with near-record levels of employment and more than 300,000 fewer idlers since the peak of the pandemic.” .
Combined with falling inflation and the government’s reform package to remove barriers to work, “we are on the right track to reduce household costs and grow the economy”, he added.
However, labor market conditions were also more accommodative than expected. The unemployment rate rose 0.3 percentage points month-on-month to 4.2% in the three months to June, in stark contrast to analysts’ expectations for no change.
Employment fell by 66,000 in the three months to June, while economists had forecast a gain of 75,000.
The rate of work inactivity also fell slightly to 20.9%, despite a record number of people unable to work due to long-term illness.
Shadow work and pensions secretary Jonathan Ashworth said the ONS figures showed the government had “failed working people and businesses across the UK”.
“Families are struggling, with record numbers of people out of work due to long-term illness and employment rates for those over 50 years old still below pre-pandemic levels,” he said. . The result has been thousands of write-offs and rising welfare costs. “
From May to July, the number of job vacancies is expected to fall by 66,000 to 1.02 million in the quarter, the 13th consecutive cycle of decline, but the number of job vacancies is still higher than before the epidemic.
Samuel Tombs, UK chief economist at consultancy Pantheon Macroeconomics, said the ONS figures showed that while slack in the labor market was rapidly increasing, “wage growth Momentum is still strong, and the MPC has not been able to stop tightening.”
Additional reporting by Lucy Fisher in London
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