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Cost of living dwarfs jump in pay growth

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12/04/2022
The rising cost of living outstripped a surge in wage growth between December and February, official data showed.

 

Pay jumped by 4% but real wages fell by 1% after taking inflation into account, according to the Office for National Statistics (ONS).

Total pay including bonuses grew by 5.4% in the same period to beat inflation by 0.4%.

There were vast differences in growth between the public sector, where total pay was up just 1.9%, compared to the private sector where pay soared by 6.2%.

Private sector pay is now increasing at its fastest level since the financial crisis.

The most recent inflation figures for February showed a 6.2% rise and it is expected to have risen further in March.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said: “Unfortunately, the worst is yet to come.

“The Bank of England is now expecting inflation to remain higher for the rest of the year, as the crisis in Ukraine puts pressure on everything from food and fuel to energy. The peak is expected to come in October, when it hits 8.7%, but it will do an awful lot of damage well before that.”

The UK unemployment rate fell to 3.8% from 3.9% a month earlier, according to data also released by the ONS today.

And job vacancies are at a record high of 1.29million, as the number of people unemployed for up to 12 months fell to lows not seen before.

Laith Khalaf, head of investment analysis at AJ Bell, added: “The reality is that what we are seeing in the labour market is the calm before the inflationary storm.

“This month price rises are going to move up a notch, and really exert pressure on consumer purses, especially when combined with tax and National Insurance increases.

“Real regular pay is already running 1% behind inflation, which means declining living standards for working people, and with inflation on the rise, that’s only going to get worse. Particularly when you consider that the freezing of income tax thresholds means less money from pay rises filtering through to consumer pockets.”

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