Wage growth holds firm while vacancies rise for first time since mid-2022

UK earnings growth remained at its highest level since last April and vacancies rose for the first time in more than two-and-a-half years despite worries over incoming wage cost pressures on firms, official figures have shown.

The Office for National Statistics (ONS) said regular average wages growth was unchanged at 5.9% in the three months to January, staying at the highest level since the three months to April last year.

Wages outstripped Consumer Prices Index inflation by 3.2%, the ONS added.

It comes ahead of the Bank of England’s latest interest rate decision at noon on Thursday, with policymakers expected to vote to hold the base rate at 4.5%.

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Encouragement

In an encouraging sign, the ONS said vacancies rose by 1,000 to 816,000 in the three months to February, which is the first rise since the quarter to June 2022.

There was also some optimism in the real-time payroll figures, showing 21,000 more workers on UK payrolls last month to 30.4 million, after increasing by a downwardly-revised 9,000 in January.

The UK unemployment rate remained unchanged at 4.4% in the three months to January, although the ONS reiterated caution over the statistic due to an overhaul of the nation’s jobs survey.

Experts said the figures were better than feared, but offer “little respite” for Chancellor Rachel Reeves ahead of next week’s Spring Statement.

Warnings from firms are mounting over job losses and price rises due to the incoming increase in national insurance contributions and the minimum wage rise due to take effect next month.

Official figures last week also showed the economy contracted by 0.1% in January.

Paige Tao, economist at PwC UK, said the recent economic indicators signalled the UK economy remains “in ‘wait-and-see’ mode”.

“Today’s release provides little respite for the Chancellor as she faces growing pressure ahead of her Spring Statement,” she added.

“Confidence needs a boost, and businesses will be watching carefully, with hiring and investment seemingly still on ice.”

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"Cracks appearing"

Elliott Jordan-Doak at Pantheon Macroeconomics said the jobs market was “holding up despite terrible mood music from firms and has improved in the past two months”.

But he said there were also signs of “some cracks appearing”, with redundancies rising for the first time in a year, to 124,000 in the three months to January.

Matt Swannell at the EY Item Club said the stubbornly-high wages data would “likely reinforce the Monetary Policy Committee’s caution” on rates.

“It seems likely the current gradual pace of interest rates cuts will continue until at least the summer, at which point the MPC will likely have more meaningful information to hand on the longer term outlook,” he said.

The figures also showed the inactivity rate stood at 21.5% in the three months to January, down from 21.7% in the previous quarter.

This follows controversial changes announced this week to reduce sickness and disability benefits.

Work and Pensions Secretary Liz Kendall insisted the figures “demonstrate the scale of the challenge we’re still facing to get Britain working again”.

“The reforms I have announced will ensure everyone who can work gets the active support they need,” she said.