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Wages grew at a record annual pace in the past three months as unemployment rose slightly, official figures show.
The Office for National Statistics said regular pay rose by 7.8 per cent between April and June.
Unemployment, meanwhile, rose to 4.2 per cent in the three months to June, up from 3.9 per cent in the previous three-month period.
The unemployment rate is the highest since the three months to October 2021, the ONS said, and brings the measure above pre-pandemic levels.
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In real terms, regular pay rose 0.1 per cent for the year when adjusting for Consumer Prices Index including owner occupiers’ housing costs (CPIH) inflation.
It is the first time since October 2021 that real wages have increased, the ONS added.
Growth in wages comes against a backdrop of high inflation, or rising prices, which have begun to ease but remain at 7.9 per cent – well above the Bank of England’s 2 per cent target.
The inflation figures for July are published later this week and analysts expect the rate to fall by as much as a full percentage point.
The data is expected to show consumer prices index (CPI) inflation falling from 7.9 per cent to around 7 per cent.
However, The Independent understands that analysis by Treasury officials shows that inflation will rebound again in August – with the unwelcome reversal set to show up in figures released the following month.
The ONS data published on Tuesday also showed that inactivity in the labour market due to long-term sickness hit a new record high.
Job vacancies also fell by 66,000 though remain just above the million mark (1.02m).
Jack Kennedy, senior economist at the global hiring and matching platform, Indeed, said: “There are signs the cost of living could finally start to ease after record annual pay growth drove pay above inflation for the first time in over one-and-a-half years.
“Regular pay growth jumped to a record 7.8 per cent year on year in the second quarter of 2023, the highest it’s been since comparable data began in 2001.
“Including bonuses, the figure was 8.2 per cent year on year, driven by one-off NHS bonuses in June.”
He added: “While the wage growth figures will grab attention, the ONS data also showed the labour market continuing to rebalance.
“The unemployment rate jumped by a larger than expected 0.3 percentage points to 4.2 per cent, driven by an increase in long-term unemployment and more people moving out of inactivity. However, inactivity due to long-term sickness hit a new record high.”
The data also shows the number of payrolled employees increased by 97,000 to 30.2 million in July, although the ONS said this is a "provisional estimate and is likely to be revised when more data are received next month".
Responding to the figures, chancellor Jeremy Hunt said: "Thanks to the action we’ve taken in the jobs market, it’s great to see a record number of employees.
"Our ambitious reforms will make work pay and help even more people into work – including by expanding free childcare next year – helping to deliver on our priority to grow the economy."
ONS director of economic statistics Darren Morgan said: "The number of unemployed people has risen again while the number of people working has fallen back a little.
"This is mainly due to people taking slightly longer to find work than those who started job hunting in recent months.
"The drop in those neither working nor looking for work is mainly among those looking after their family or home.
"Meanwhile the number of people prevented from working by long-term sickness has risen again to a new record.
"Job vacancies have now fallen over a quarter of a million since this time last year. However, they remain significantly above pre-Covid levels.
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"Earnings continue to grow in cash terms, with basic pay growing at its fastest since current records began.
"Coupled with lower inflation, this means the position on people’s real pay is recovering and now looks a bit better than a few months back."
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