Wages keep growing above inflation, dampening hopes for interest rate cut ahead of General Election

11 June 2024, 07:54

Commuters crossing London Bridge, in central London, during the morning rush hour.
Commuters crossing London Bridge, in central London, during the morning rush hour. Picture: Alamy

By Kit Heren

Wages are continuing to grow strongly, which may mean that the Bank of England is less likely to cut interest rates later this month.

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Basic pay rose by 6% in the three months to April, flat on the figure reported by the Office for National Statistics (ONS) a month ago.

This was in part down to the government's 9.8% increase to the National Living Wage, which came into force in April.

That is good news for workers but may mean that the Bank decides not to cut interest rates on June 20, which would be a blow to people looking to secure a mortgage.

The ONS also said that unemployment increased slightly to reach its highest rate since the summer of 2021, signalling a weakening jobs market.

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The rate of UK joblessness increased to 4.4% in the three months to April, up from 4.3% in the three months to March.

Some economists had thought the unemployment rate would stay unchanged - but instead it reached its highest level since the period from July-September 2021.

Vacancies also dropped sharply once again, down 12,000 to 904,000 in the three months to May - the 23rd fall in a row.

The ONS said: "This month's figures continue to show signs that the labour market may be cooling, with the number of vacancies still falling and unemployment rising, though earnings growth remains relatively strong."

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Rebecca Florisson, an analyst at the Work Foundation think tank at Lancaster University, said that despite the strong wage growth, many people did not feel like they were growing richer.

"There are signs that the wage growth recovery has peaked," she said, adding that "the economic impact of the Covid-19 pandemic and the war in the Ukraine has made this the first Parliament since 1955 where living standards have declined."

Ms Florisson said that "the reality is that most people are feeling poorer than when they last voted in the last General Election nearly five years ago.

She added that parties' General Election manifestos "must prioritise de-risking the journey back into work, through high quality employment support and designing jobs that offer people adequate reward, security, flexibility and progression."

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