British wages grew at the fastest rate seen outside the pandemic period at the end of 2022, according to data that will strengthen the Bank of England’s determination to keep raising interest rates to combat inflation.
Average pay in the three months to November was 6.4 per cent higher than a year earlier, both including and excluding bonuses, the Office for National Statistics said on Tuesday.
But wage growth was much stronger in the private sector than in the public sector – 7.2 percent compared to 3.3 percent – a gap that will fuel the bitter battle between the government and striking public sector workers.
The wave of strikes that swept the UK was the most disruptive for more than a decade in November, even before nurses, ambulance staff and civil servants began their industrial action. The ONS said 467,000 working days were lost to labor disputes in November, the highest since 2011.
With inflation running at 10.7 percent in December, average earnings were still 2.6 percent lower than a year earlier in real terms, one of the biggest falls in living standards since comparable records began in 2001, the US said.
However, in response to Tuesday’s figures, Chancellor Jeremy Hunt said that the “single best way to help people’s wages go further” was “to stick to our plan to halve inflation this year”. It suggests he remains opposed to higher funding for government departments which would allow them to make a significantly better pay offer to NHS workers and teachers.
Economists said the acceleration in wage growth would strengthen the case for the BoE’s Monetary Policy Committee to continue raising interest rates when they meet next month, and traders priced in a higher likelihood of a 0.5 percentage point hike after data was released.
“At the moment the jobs market is too strong for comfort for the Bank of England,” said Investec economist Sandra Horsfield. She added: “The worry is that, if wage growth exceeds productivity gains, firms may seek to pass on some of these extra costs . . . prolonging the onslaught of inflation.”
BoE chief economist Huw Pill said earlier this month that high inflation may persist longer in the UK than elsewhere as low unemployment and persistently high economic inactivity push up wage growth, adding to price pressures.
The latest figures showed the job market remained strong even as the economy weakened in the face of rising energy prices, with the unemployment rate at 3.7 per cent for the three months to November. This was unchanged from the previous month’s reading – although higher than the previous quarter’s figure of 3.5 per cent.
Employment was also largely unchanged from previous figures, as was the rate of economic inactivity, although some older workers who have left the labor market since the start of the pandemic have begun looking for work again as cost-of-living pressures begin to bite.
However, there were early signs that the labor market may be turning. The number of job vacancies has fallen for a sixth consecutive month – although it remains well above pre-Covid levels, with a ratio of one job unfilled for every unemployed jobseeker.
The number of layoffs has also risen steadily over the past year, returning to pre-pandemic levels, and the number of people claiming jobless benefits increased in December, suggesting that unemployment will soon rise.
“After experiencing a period where employees had almost unprecedented levels of power, we may be starting to see signs of a shift back to employers having greater control,” said Pawel Adrjan, an economist at job search website Indeed.
