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| Pay rise surprise leads to forecasts of higher interest rates | Pay rise surprise leads to forecasts of higher interest rates |
| (32 minutes later) | |
| UK wages have risen at their fastest rate in 20 years, excluding the pandemic, raising expectations that UK interest rates will have to rise. | UK wages have risen at their fastest rate in 20 years, excluding the pandemic, raising expectations that UK interest rates will have to rise. |
| Regular pay excluding bonuses increased by 7.2% in the three months to April, although it still lags behind inflation - the rate at which prices rise. | Regular pay excluding bonuses increased by 7.2% in the three months to April, although it still lags behind inflation - the rate at which prices rise. |
| The Bank of England has warned big pay rises are contributing the UK's still-high rates of inflation. | The Bank of England has warned big pay rises are contributing the UK's still-high rates of inflation. |
| It has put up interest rates 12 times since 2021 to try to slow price rises. | It has put up interest rates 12 times since 2021 to try to slow price rises. |
| Higher interest rates may be good for savers, but are driving up repayment costs for millions of mortgage holders. | Higher interest rates may be good for savers, but are driving up repayment costs for millions of mortgage holders. |
| And fears the Bank of England will raise interest rates higher than previously thought - from their current 4.5% to as high as 5.5% - have been causing turbulence in the mortgage market. | |
| Lenders have been putting up rates and pulling hundreds of deals, causing uncertainty for borrowers. | Lenders have been putting up rates and pulling hundreds of deals, causing uncertainty for borrowers. |
| On Tuesday, the government's borrowing costs - which directly impact mortgage rates - rose to their highest rate since last year's mini-budget. | |
| Samuel Tombs, chief UK economist at Pantheon Economics, said the renewed pick-up in wage growth would "add fuel" to expectations for higher interest rates. | |
| This was because the figures were"fanning the impression that the UK has a unique problem with ingrained high inflation". | |
| Darren Morgan, director of economic statistics at the Office for National Statistics (ONS), said 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". | Darren Morgan, director of economic statistics at the Office for National Statistics (ONS), said 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". |
| "However, even so, wage rises continue to lag behind inflation." | "However, even so, wage rises continue to lag behind inflation." |
| According to the ONS, pay when adjusted for inflation fell by 1.3% in the three months to April. | According to the ONS, pay when adjusted for inflation fell by 1.3% in the three months to April. |
| Five tips when asking for a pay rise | Five tips when asking for a pay rise |
| How to get a job: Six expert tips for finding work | How to get a job: Six expert tips for finding work |
| The rise in the minimum wage had had a "significant" impact on the April pay figures, said Andrew Hunter, co-founder of the job search engine Adzuna. | The rise in the minimum wage had had a "significant" impact on the April pay figures, said Andrew Hunter, co-founder of the job search engine Adzuna. |
| The minimum wage - known as the National Living Wage - rose to £10.42 an hour in April for those aged 23 and over. | The minimum wage - known as the National Living Wage - rose to £10.42 an hour in April for those aged 23 and over. |
| "Nearly two million workers in the UK saw an almost 10% increase in pay this spring," Mr Hunter told the BBC's Today programme. | "Nearly two million workers in the UK saw an almost 10% increase in pay this spring," Mr Hunter told the BBC's Today programme. |
| Workers in multiple industries have held strikes since last summer as pay rates fail to keep pace with inflation. But the gap is narrowing as inflation starts to fall. | Workers in multiple industries have held strikes since last summer as pay rates fail to keep pace with inflation. But the gap is narrowing as inflation starts to fall. |
| The Bank of England has warned sharp pay rises are likely to prolong the UK's still-high rates of inflation. The cost of living rose by 8.7% in the year to April, more than four times the Bank's 2% target. | |
| Mr Hunter said: "Your average worker will be delighted that their pay on average is going up, but that's not necessarily a good thing for inflation." | Mr Hunter said: "Your average worker will be delighted that their pay on average is going up, but that's not necessarily a good thing for inflation." |
| The bottom line of these numbers is that it is difficult to see evidence of a cooling labour market, and therefore the Bank of England is still on course to push rates above 5% in the coming weeks. Markets even think there is now a 35% chance of a 0.5 percentage point rise next week. | |
| Normal wages are still on the rise, with private sector wage growth now at 7.6% in the three months to April. That is far stronger than expected. The impact of the rise in the National Living Wage is an important factor here. This is still however below the rate of inflation, meaning a cash rise but an ongoing squeeze in real terms. It will not feel like a wage boom. | |
| UK employment and hours of work in the economy finally exceeded levels seen before the pandemic. Vacancies are down, but still well over one million. They are only being filled slowly. A record level of long-term sickness remains a key challenge. | |
| In recent days, financial markets have been pushing interest costs for two-year UK government lending back up to the levels last seen at the mini-budget, and above US levels. This is a bet that UK inflation is proving more stubborn and sticky than expected and elsewhere. Today's figures provide more evidence for that. | |
| Figures from the ONS also showed that: | |
| The UK unemployment rate dipped slightly to 3.8% from 3.9% in the three months to April | |
| The number of people not working due to long term sickness hit a fresh record of almost 2.6 million | |
| The number of people in work hit an all-time high of 33.1 million. | |
| The UK economy is currently struggling to grow as the soaring cost of living and rising interest rates squeeze households. But the jobs market remains resilient. | |
| Chancellor Jeremy Hunt said: "Rising prices are continuing to eat into people's pay cheques - so we must stick to our plan to halve inflation this year to boost living standards." | |
| However, Labour's shadow chancellor Rachel Reeves said: "Family finances are being squeezed to breaking point by a further fall in real wages, and record numbers of people are out of work due to long-term sickness." | |
| Related Topics | Related Topics |
| Unemployment | Unemployment |
| UK economy | UK economy |
| Pay | Pay |
| Office for National Statistics | Office for National Statistics |