The ONS confirmed that growth in regular pay, which excludes bonuses, stood at 7.3 per cent for the period. That’s level with the highest growth rate, which was also seen last month and during the April to June 2021 period.
Growth in average total pay, which includes bonuses, was 6.9 per cent for the period.
Despite the large increase in cash terms, in real terms total pay dropped by 1.2 per cent and regular pay fell by 0.8 per cent as a result of the persistently high rate of inflation.
The ONS data also found that between April and June 2023, the number of vacancies dropped by around 85,000 to 1.034m. That’s the 12th consecutive period of falling job vacancies.
Overall, employment was estimated to be at 76 per cent for March to May, a rise of 0.2 percentage points from the December to February period. This was put down to a growth in part-time employees.
However, unemployment also rose, by 0.2 percentage points to four per cent.
Experts noted that continued wage growth is likely to put pressure on the Bank of England to raise the base rate once again.
Sanjay Raja, chief UK economist at Deutsche Bank said: “For now, evidence of still more persistent wage pressures will keep the Monetary Policy Committee’s (MPC) foot on the accelerator. A second consecutive 50bps hike now looks more likely than not. Accordingly, we change our call for August, and now expect a 50bps hike at the next BoE meeting, taking bank rate to 5.5 per cent. We keep our terminal rate projection fixed at 5.75 per cent, however, and see the MPC delivering at least one further quarter point hike in September.”
Rising wages create conundrum
Myron Jobson, senior personal finance analyst at interactive investor, suggested that there was a sense that many employers were “reining in their recruitment” as a result of concerns over the general economic picture.
He added: “Pay packets continue to grow, with wages excluding bonuses hitting their joint highest growth rate on record, which is a headache for the Bank of England amid its ongoing battle to tame stubbornly high inflation.
“While high pay awards help ease the cost-of-living squeeze on household finances, they can fuel the inflation beast as businesses could opt to pass the increase in labour cost onto customers by raising the prices of goods and services.”
Too high yet too low
This was echoed by Sarah Coles, head of personal finance at Hargreaves Lansdown, who suggested that the figures likely meant more interest rate rises were on the cards, which could “exacerbate a growing weakness in the jobs market”.
She noted that there will be concern at the Bank of England that pay rises will boost demand and feed inflation.
“Somehow, pay is simultaneously too high for the Bank of England’s liking, and yet too low to keep up with inflation,” she added. “Wages are closing in on inflation, but we’re still poorer with each passing month.”
