Exact rate wages are rising revealed and what it means for your money – including pay rise and interest rate cuts
AVERAGE earnings in the UK have remained high, fresh data has shown.
Regular earnings decreased to 5.6% in the three months to February, but was 2.8% higher after taking inflation into account.
That is according to the latest figures from the Office of National Statistics.
Elsewhere, average weekly pay grew by 5.9% for the three months to February.
This was the same as the previous quarter, which had been the highest level since April last year.
The Bank of England watches jobs and wages figures closely when making a decision about interest rates.
Last month, rate-setters voted to maintain the base rate at 4.5%.
Lenders use the base rate to determine the interest rates offered to customers on savings and borrowing costs, including mortgages.
Today’s figures come one day ahead of March’s inflation figures, which will be released by the ONS tomorrow.
Inflation fell in February after it was helped by a drop in woman’s clothing to 2.8%.
But it still remained above the Bank of England‘s target of 2%.
Inflation is a measure of how much the prices of everyday goods such as food and clothes, and services such as train tickets and haircuts, have increased compared to a year earlier.
Elsewhere, the rate of UK unemployment also remained unchanged at 4.4% in the three months to February.
Liz McKeown, director of economic statistics at the ONS said: “Regular pay growth remains strong having increased slightly in the latest period.
“Growth accelerated in the public sector as previous pay rises fully fed through to our headline figures, while pay in the private sector was little changed.
She added: “The latest survey results estimate that the unemployment rate is unchanged on the previous three months, while separately the number of employees on payroll fell slightly over the same period.”
Why does inflation matter?
INFLATION is a measure of the cost of living. It looks at how much the price of goods, such as food or televisions, and services, such as haircuts or train tickets, has changed over time.
Usually people measure inflation by comparing the cost of things today with how much they cost a year ago. The average increase in prices is known as the inflation rate.
The government sets an inflation target of 2%.
If inflation is too high or it moves around a lot, the Bank of England says it is hard for businesses to set the right prices and for people to plan their spending.
High inflation rates also means people are having to spend more, while savings are likely to be eroded as the cost of goods is more than the interest we’re earning.
Low inflation, on the other hand, means lower prices and a greater likelihood of interest rates on savings beating the inflation rate.
But if inflation is too low some people may put off spending because they expect prices to fall. And if everybody reduced their spending then companies could fail and people might lose their jobs.
See our UK inflation guide and our Is low inflation good? guide for more information.
WHAT IT MEANS FOR YOUR MONEY
Generally speaking, high wages are a positive for the economy, especially when it is higher than the rate of inflation.
It means households have more purchasing power and a lot of that money will go back into the economy.
But rising wages have previously been blamed for keeping inflation high by Bank of England bosses.
Isaac Stell, investment manager at Wealth Club, said today’s figures were “good news” for the government despite the “negative economic mood”.
However said that while today’s figures may be positive, households “must not breed complacency”.
“The hike in taxes will ultimately impact the bottom line for many businesses and the implications on wage growth and employment could be far reaching.”
He explained: “They are yet to account for the higher employment taxes that came into effect this April.”
The government increased the rate of employer National Insurance Contributions from 13.8% to 15% on April 6.
The move was widely criticised by a number of business leaders, who warned the move would lead them to hike prices.
The UK has also found itself in the period of uncertainty as it waits to see the full impact of Donald Trump’s tariffs on economies across the globe.
On the employment front, Suren Thiru, ICAEW economics director, said today’s figures indicate that labour market activity was “sluggish”.
He said: “This strong wage growth may be more a lagging indicator of wider labour market conditions than strengthening underlying inflation, as it takes time for employers to adjust pay settlements to changing circumstances.
“The UK’s jobs market is entering a turbulent period with a troubling mix of escalating global uncertainty and rising cost pressures, notably the national insurance hike, likely to moderately push up unemployment, despite continued challenges over skills shortages.”
He also added: “While these figures may not shift the dial on a May interest rate cut, concern over the impact of this global financial volatility may push rate setters to act to avoid a marked deterioration in economic conditions.”
Why does inflation matter?
INFLATION is a measure of the cost of living. It looks at how much the price of goods, such as food or televisions, and services, such as haircuts or train tickets, has changed over time.
Usually people measure inflation by comparing the cost of things today with how much they cost a year ago. The average increase in prices is known as the inflation rate.
The government sets an inflation target of 2%.
If inflation is too high or it moves around a lot, the Bank of England says it is hard for businesses to set the right prices and for people to plan their spending.
High inflation rates also means people are having to spend more, while savings are likely to be eroded as the cost of goods is more than the interest we’re earning.
Low inflation, on the other hand, means lower prices and a greater likelihood of interest rates on savings beating the inflation rate.
But if inflation is too low some people may put off spending because they expect prices to fall. And if everybody reduced their spending then companies could fail and people might lose their jobs.
See our UK inflation guide and our Is low inflation good? guide for more information.