Wages were on Tuesday revealed to be rising faster than expected, stoking fears of further interest rate hikes that will intensify the pressure on home owners.
The Office for National Statistics said regular wages, not including bonuses, surged 7.2 per cent in the three months to April, the quickest rate of increase yet recorded outside the pandemic years. Private-sector wages rose at 7.6 per cent with the financial services sector leading the way with 9.2 per cent.
Pay continues to lag behind prices, with regular wages down 2.3 per cent in real terms, but the pace of wage rises will cause alarm at the Bank of England amid fears it will further stoke inflation.
The Bank’s Monetary Policy Committee meets next week to decide on the level of interest rates. A further quarter point rise to 4.75 per cent is seen as “nailed on” but some traders now fear a more decisive half point move straight to five per cent is increasingly possible with rates staying at five per cent or above for the rest of the year.
The latest wages data came amid turmoil in the gilts and mortgage markets with government bond yields spiking this morning to levels close to those seen in the chaotic aftermath of last September’s mini-budget.
It came after lender Santander withdrew all its new mortgage products for repricing tomorrow. NatWest also increased the interest rate on many of its products.
The remarkable strength of the jobs market was underlined by an unexpected fall in the unemployment rate. The ONS said the UK jobless rate fell to 3.8 per cent in the three months to April from 3.9 per cent in the previous quarter. Most economists were expecting the unemployment rate to edge up to four per cent. The ONS said that the employment rate rose to 76 per cent in the latest quarter, edging up from 75.9 per cent in the previous three months, with the number of people in jobs at an all-time high of 33.1 million, up 250,000, as more Britons returned to the jobs market.
Darren Morgan, director of economic statistics at the ONS, said: “With another rise in employment, the number of people in work overall has gone past its pre-pandemic level for the first time, setting a new record high, as have total hours worked.
“The biggest driver in recent jobs growth, meanwhile, is health and social care, followed by hospitality. While there has been another drop in the number of people neither working nor looking for work, which is now falling right across the age range, those outside the jobs market due to long-term sickness continues to rise, to a new record.”
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.”
Samuel Tombs, economist at forecaster Pantheon Macroeconomics said the figures suggest that “wage growth has far too much momentum for the Monetary Policy Committee to stop hiking the bank rate yet”.
