Average wages remain inflated although the UK jobs market showed signs of loosening, according to the latest figures from the Office for National Statistics (ONS).
The unemployment rate for March to May increased by 0.2 percentage points on the quarter to 4.0%, driven by the number of people unemployed for up to 12 months.
The number of payrolled employees in June fell 9,000 to 30.0mln while the number of vacancies fell by 85,000 between April and June from the previous quarter to 1,034,000, the 12th consecutive fall.
But growth in average total pay (including bonuses) was 6.9% and growth in regular pay (excluding bonuses) was 7.3% in March to May 2023.
For regular pay, this equals the highest growth rate, which was also seen last month and during the coronavirus (COVID-19) pandemic period for April to June 2021.
In real terms (adjusted for inflation), growth in total and regular pay fell on the year in March to May, by 1.2% for total pay and 0.8% for regular pay.
Economists had expected a small slowdown in pay growth today, to 7.1%, but this data suggests that wage inflation is more persistent – which will cause serious worries in the Bank of England, which fears a price-earnings spiral.
Sarah Coles at Hargreaves Lansdown said: “These are anti-goldilocks jobs figures, with wage rises running too hot for the Bank of England’s liking, and the market cooling off far too fast to offer any certainty over jobs.”
“It’s likely to mean both that interest rate rises are on the cards, and that more interest rate rises could well exacerbate growing weakness in the jobs market.”
But Samuel Tombs at Pantheon Macroeconomics suggested signs that the labour market is loosening will “bolster the case for the MPC to stop its rate hiking cycle soon”.
“The slowdown in hiring will reduce job-to-job flows and thus squeeze the contribution to wage growth from labour market churn, as well as ease the pressure on employers to offer existing staff large wage rises,” he thinks.
This morning’s data comes just hours after Bank of England governor Andrew Bailey and chancellor Jeremy Hunt called for wage and price restraint to help the fight against inflation.
In his annual Mansion House dinner, Bailey told City chiefs: “Both price and wage increases at current rates are not consistent with the inflation target.”