UK wage growth accelerated by more than expected in the three months to December, according to official statistics that will be closely watched by the Bank of England ahead of its next interest rate decision.
Growth in average regular pay, excluding bonuses, rose to 6.7 per cent in the final three months of 2022, compared with the same period in 2021. That was up from 6.4 per cent in the three months to November.
That was stronger than the 6.5 per cent forecast by economists polled by Reuters. The Office for National Statistics said it was the strongest regular pay growth rate outside the coronavirus pandemic period.
Once again, pay grew more quickly in the private sector than it did for public servants. Average regular pay growth for the private sector was 7.3 per cent in the last three months of 2022, and 4.2 per cent for the public sector.
However, pay growth in both sectors is still below inflation, which is running at 10.5 per cent.
Darren Morgan, ONS director of economic statistics, said: “Although there is still a large gap between earnings growth in the public and private sectors, this narrowed slightly in the latest period. Overall, pay, though, continues to be outstripped by rising prices.”
The labour market remained tight. The unemployment rate was unchanged at 3.7 per cent in the three months to December, just 0.2 percentage points above its historical low of 3.5 per cent.
Job vacancies continued to decline, but remained well above the historical average.
Commenting on the data, chancellor Jeremy Hunt said: “In tough times unemployment remaining close to record lows is an encouraging sign of resilience in our labour market.
“The best thing we can do to make people’s wages go further is stick to our plan to halve inflation this year.”
Earlier in the month, the Bank of England warned that the labour market remained tight and wage pressures had been stronger than expected, “suggesting risks of greater persistence in underlying inflation”.
The BoE has raised interest rates from 0.1 per cent in November 2021 to 4 per cent in February.
Markets are pricing a 0.25 percentage point increase in interest rates when the Monetary Policy Committee meets on March 23. That would represent a slowdown from the half percentage point rate increase announced in February.
