The UK government’s approach to public pay settlements is firm and robust, according to Work and Pensions Secretary Mel Stride during an interview with LBC.
Recent figures from the Office for National Statistics (ONS) reveal that private sector pay grew by 7.7% in the three months leading up to May, marking the fastest pace on record outside of the pandemic. Additionally, average regular wages across the economy rose by a record-equalling 7.3%.
Despite being lower than the current 8.7% level of inflation, there are concerns that this data indicates inflation is becoming embedded in the economy through a wage-price spiral. Economist Divya Sridhar from PwC warned about the implications of strong wage growth on high inflation levels.
Following the release of the wage data, traders increased their bets on a 0.5 percentage point interest rate increase at the Bank of England’s upcoming monetary policy meeting. If this happens, the base rate would reach its highest level since late 2007 at 5.5%.
In addition, according to the ONS labour market report, the UK’s employment rate edged up slightly in the three months leading up to May, reaching 76%, while unemployment rose by 0.2 percentage points to 4%. The economic inactivity rate, which measures those out of work but not actively seeking employment, decreased by 0.4 percentage points to 20.8%.
The labour market also reflects the impact of higher interest rates and economic uncertainty, as vacancies have fallen for the 12th consecutive month to 1,034,000.
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