UK wages grow at a record pace, nearing the inflation rate

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Wages in the United Kingdom grew 7.8% in the three months to June, the fastest annual rate since records began, the Office for National Statistics said Tuesday.

“Coupled with lower inflation, this means the position on people’s real pay is recovering,” said ONS director of economic statistics Darren Morgan.

UK consumer prices rose 7.9% in June compared with June 2022.

The data will worry policymakers at the Bank of England, who are already concerned that strong pay growth is fueling inflation.

The central bank implemented its 14th consecutive interest rate hike earlier this month in a long-running battle to tame rising prices, taking its benchmark rate to 5.25% — the highest level since February 2008.

“With wage growth still accelerating, this supports our view that the Bank of England will deliver one more [quarter-percentage-point] rate hike before it brings its tightening cycle to a close,” said Ruth Gregory, deputy chief UK economist at Capital Economics.

However, the ONS data also showed signs that the labor market is cooling, which policymakers will welcome, Gregory added.

The unemployment rate ticked upward in the quarter to June, rising to 4.2%, but it remains low by historical standards.

Meanwhile, vacancies fell by 66,000 in the three months to July, compared with the February-to-April quarter, though they remain above 1 million.

“Job vacancies have now fallen over a quarter of a million since this time last year. However, they remain significantly above pre-Covid levels,” said Morgan at the ONS.

— This is a developing story and will be updated.


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