Rising Prices See Regular Pay Drop At Fastest Rate In A Decade

Regular pay is falling at the fastest rate in more than a decade when taking into account rising prices, the Office for National Statistics has said.

Between February and April, pay excluding bonuses was down 2.2% from a year earlier when adjusted for inflation, the ONS said.

UK household budgets are being squeezed by record fuel and energy costs.

However, pay including bonuses is outpacing price rises, rising by 0.4% when taking inflation into account.

Sam Beckett, head of economic statistics at the ONS, said a "high level of bonuses" was continuing to "cushion the effects of rising prices on total earnings for some workers".

"But if you exclude bonuses, pay in real terms is falling at its fastest rate in over a decade," she added.

Regular pay has fallen roughly by 1.6% for private sector workers and 4.5% for those in the public sector.

The ONS noted that the latest wage figures are compared with the same period in 2021 when Covid restrictions were in place and some workers were furloughed.

Meanwhile, the ONS said the number of job vacancies in the UK rose to a new record of 1.3 million from March to May.

The unemployment rate stood at 3.8% in the February to April period, up slightly from last month, while the employment rate was 75.6%, which is still lower than before the pandemic.

Neil Carberry, chief executive of the Recruitment and Employment Confederation, said the jobs figures showed what a "great time it is to be looking for work".

He said with record numbers of roles available, "pay is growing strongly as companies seek to attract people to work for them".

But Mr Carberry warned if "we don't address the fact that there are not enough people looking for work, this could put another dampener on the UK's economic growth".

"We have to improve our activation programmes to help Job Centres get people into work quickly, and radically reform the skills system to help fill some of the gaps," he said. "And we also need an immigration system that is flexible enough to address the really sharp shortages we're seeing in some parts."

The jobs numbers remain a welcome relief from the stagflation seen elsewhere in the UK figures, but the strength here appears to be peaking.

Unemployment remains very low and there was an overall rise in employment over the past three months, though not yet recovering all the lost jobs since before the pandemic.

Still there were some signs of a turning point under the hood of these numbers. Unemployment actually edged up a little. And looking at the single month figures for April, when energy bills spiked and taxes went up, unemployment was up to 4.2% and employment notably down.

For those with jobs, ordinary pay fell in real terms at the fastest rate for a decade. In the private sector, bonuses are cushioning this for some workers reflecting one off payments and recruitment into new jobs.

Vacancies remain at record levels too, with a worker shortage starting to have visible consequences at airports and in the NHS. But the defining economic question still to be answered is how much wages can compensate for the surge in the rate of price rises. The answer so far is not much, especially in the public sector.

The ONS added the the number of "economically inactive" people - those without a job and not seeking to work - had fallen slightly in the past three months, but was still higher than before Covid struck.

Ms Beckett said at the start of the pandemic many young people leaving education had "disengaged" from the looking for work due to most businesses and work places being shut during lockdowns.

But she told the BBC's Today programme more recently the "story had changed" with more people over the age of 50 becoming economically inactive by "retiring early, or just not needing to work, or indeed suffering ill health".