The fastest rate of decline in the real value of UK workers’ pay or UK Pay in over a decade continues, as high inflation outpaced wage increases in February.
The Office for National Statistics reported that annual growth in average pay, excluding bonuses, remained at 6.6% in the three months to February, despite a slight increase in unemployment and a decrease in job vacancies.
Wage growth, including bonuses, increased by 5.9%, driven by high pay for bankers and accountants in the City of London. Economists had predicted weaker pay growth rates, presenting a potential dilemma for the Bank of England as it weighs whether to raise interest rates for the 12th consecutive time in May.
However, the ONS said total pay fell by 4.1% on the year after taking inflation into account – among the largest falls since 2009.
The Unemployment Rate
Reflecting softer conditions in the jobs market as Britain’s economy struggles for growth momentum, the unemployment rate unexpectedly rose to 3.8%. The number of job vacancies also fell for a ninth consecutive month, although remained high at more than 1.1m as companies struggle to recruit staff.
The chancellor Jeremy Hunt said: “While unemployment remains close to historic lows, rising prices continue to eat into pay cheques which is why halving inflation this year is one of our top economic priorities.”
The latest snapshot showed a rise in the number of working days lost to strikes in February amid industrial action by civil service staff and teachers, with 348,000 working days lost during the month.
Average wage growth in the public sector picked up to 5.3% on the year, the fastest annual rate since 2005, although continued to lag behind wage growth of 6.9% in the private sector.
Paul Nowak, the TUC general secretary, said the figures showed workers were suffering the longest wages slump in modern history. Calling on ministers to resolve pay disputes, he said: “Hard-pressed families can’t take much more. It is no surprise that workers are having to take strike action to defend their living standards.”