Wage growth came in faster than expected last quarter, dealing a blow to hopes that the Bank of England will be able to start cutting interest rates this summer.
Total pay including bonuses grew by 5.9pc in the three months to April, according to the Office for National Statistics (ONS).
This was higher than economists’ predictions of growth of 5.7pc. Meanwhile, the previous three-month period’s growth was also revised higher from 5.7pc to 5.9pc.
Real pay, which takes into account the impact of inflation, increased by 2.7pc from February to April, which was the highest since the three months to September 2021 – or the highest since 2015 excluding the pandemic.
It comes as the minimum wage increased by £1.02 in April to £11.44 for workers aged over 21, helping to sustain the recent boost in workers’ earnings.
Wages continued rising last quarter despite a jump in unemployment and a new record high for levels of long-term sickness. That pushed up economic inactivity, which accounts for the number of people neither in work nor looking for a job.
Economists said sustained strong pay rises would worry the Bank’s policymakers.
Monica George Michail at the National Institute of Economic and Social Research said: “The persistence of wage growth raises concerns about stickier inflation, prompting the Bank of England to remain cautious about interest rate cuts.”
Jake Finney, economist at PwC UK, said the latest ONS data “presents a headache for the Bank of England”.
He added: “A broad set of indicators suggests that the labour market is cooling but pay growth has not fallen to the extent they would like to see.”
Other economists agreed, with Simon French of Panmure Gordon saying wage growth remained “too hot”.
Yael Selfin, chief economist at KPMG UK, said she expected the Bank’s Monetary Policy Committee to hold rates at 5.25pc next week.
Despite strong wage growth, the broader jobs market appeared weak.
Unemployment rose by 138,000 people over the past three months, taking the total number of jobseekers to above 1.5m for the first time since 2021.
Employment also fell by 139,000 over the same period to below 33m, while levels of economic inactivity hit a new record high of 9.43m, the highest since the aftermath of the financial crisis.
The number who said they could not work because of long-term sickness rose by another 55,000 to 2.83m, a new record high.
Meanwhile, the number of people working in the public sector hit 5.95m, its highest level since 2012.
This was driven by growth in the NHS, which now employs more than 2m people. That is in comparison to the armed forces, which now have a headcount of 148,000 - the smallest since records began in 1999.
At the same time, the number of people working in the private sector fell to 27m, its lowest since the end of 2021.
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