Homeowners were warned to expect more interest rate rises after figures out yesterday raised fears inflation will stay high.
Wages have surged at their fastest rate outside of the pandemic, soaring by 7.2 percent in the three months to April – up from 6.8 percent in the three months to March.
Yet pay continues to be outstripped by rocketing prices, with regular wages down 2.3 percent when inflation is taken into account. Unemployment fell as those in work soared past pre-Covid levels for the first time to a record high.
The UK jobless rate dipped to 3.8 percent in the three months to April from 3.9 percent in the previous quarter, easing fears of a looming recession.
But there were also some worrying signs for the employment sector, with vacancies falling for the eleventh time in a row and another record high for those off work due to long-term sickness. And the jump in wages and jobs is almost certain to force the Bank of England into another rate rise when the Monetary Policy Committee meets next Thursday.
Yields on two-year dated UK Government bonds – a key financial indicator used to set mortgages – went even higher yesterday than those following September’s shambolic mini-budget under Liz Truss. Investors were betting the Bank of England is certain to raise the base rate next week above 4.5 percent.
The Resolution Foundation said a return to real-term wage growth was on the way as inflationcontinues to fall.
Hannah Slaughter, senior economist at the think tank, said: “Record pay growth across Britain means our 18-month run of falling real wages may have ended.
“But, while this is welcome news for workers, it will worry the Bank of England and anyone looking to remortgage, as it adds to the case for raising interest rates for longer.”
Samuel Tombs, at Pantheon Macroeconomics, said the figures suggest “wage growth has far too much momentum for the Monetary Policy Committee to stop hiking the Bank Rate yet”. And he warned that the economic trends fanned “the impression that the UK has a unique problem with ingrained high inflation”.
Mr Tombs added: “We think year-over-year growth in average weekly wages will slow to about five percent by the end of this year, on course for 3.5 percent in 2024. We remain unconvinced, therefore, that the MPC will need to increase Bank Rate all the way to 5.5 percent by the end of this year, as markets expect. A five percent peak still looks more likely to us.”
Chancellor Jeremy Hunt said: “The number of people in work has reached a record high, and the IMF (International Monetary Fund) and OECD (Organisation for Economic Co-operation and Development) recently credited our major reforms at the Budget which will help even more back into work while growing the economy.
“But rising prices are continuing to eat into pay cheques – so we must stick to our plan to halve inflation this year to boost living standards.”
The ONS said the employment rate rose to 76 percent in the latest quarter, edging up from 75.9 percent in the previous three months.The number of people in jobs is at an all-time high of 33.1 million, up 250,000 quarter on quarter as more people returned to the workforce.
More timely data estimated the number of employees on payrolls rose by 23,000, or 0.1 percent, during May to 30 million, while the ONS revised away last month’s surprise fall, with data now showing an increase of 7,000 in April.
Darren Morgan, of the ONS, 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 is health and social care, followed by hospitality.
“While there has been another drop in the number 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.” The number off long-term sick reached another high of 2.6 million in the three months to April.
