AVERAGE earnings have grown for the third consecutive month, new data shows.
Average weekly earnings, excluding bonuses, rose by 5.9% in the last three months of 2024, compared with the same period a year earlier.
That’s up from 5.6% last month, official figures from the Office for National Statistics (ONS) show.
When taking into account inflation, which is currently 2.5%, wages grew 3.4%.
If wages don’t keep up with rising prices, then it means people are worse off in real terms.
Liz McKeown, director of economic statistics at the ONS, said: “Growth in pay, excluding bonuses, rose for a third consecutive time, with increases seen in both the private and public sector.
“After taking account of inflation, real pay growth also increased slightly.”
The latest figures also show the rate of UK unemployment remained unchanged at 4.4%.
But the ONS reiterated caution over the statistic due to an overhaul of the nation’s jobs survey.
The number of vacancies pulled back once again, down 9,000 to 819,000 in the three months to January.
But in a more encouraging sign, the ONS estimated that the number of UK workers on payrolls rose by 21,000 during January to 30.4 million.
This followed a downwardly revised drop of 14,000 in December.
The data comes amid warnings from businesses over job losses and higher prices after the Government moved to increase national insurance contributions and announced another rise in the minimum wage in last October’s Budget.
A survey of UK employers this week revealed that companies are planning to cut jobs or recruit fewer people ahead of the increase to National Insurance payments for employers and wages.
Businesses which were questioned by the Chartered Institute of Personnel and Development (CIPD) said they would raise their prices to cover increasing employment costs.
Increases in Employer National Insurance contributions and the National Minimum Wage, which were announced in October’s Budget, come into force in April.
These increases will add millions of pounds in costs for businesses and could force them to reduce the number of staff they have or increase prices to stay afloat.
Luke Bartholomew, deputy chief economist at abrdn, said these increases will be a “big test for the labour market”.
He added: “There are clear signs that hiring intentions have cooled in anticipation of these increases, but part of the concern will be how well unemployment data captures this impact in real time given the well-known quality issues with the data.
“But if growth remains very sluggish there is a clear path to more rapid rate cutting in the second half of the year.”
Hunt for growth gets harder
By Jack Elsom, chief political correspondent.
Rachel Reeves’ hunt for growth looks like it’s getting a hell of a lot harder.
Today’s figures back up what bosses have been saying for months – there are fewer jobs out there.
Short of putting up a “no vacancies” sign across Britain, businesses could not have been clearer that the impact of Labour’s tax-hiking Budget will mean a staffing squeeze.
Job vacancies have been declining for two years, but the combination of a £25billion National Insurance whack, the minimum wage increase, and new employment laws mean many companies simply cannot afford new workers.
This spells peril for the Chancellor’s hopes of convincing firms to expand and invest in the name of economic growth.
She has only narrowly avoided sliding into recession, and needs to find something other than the high-tax, high-spend doom loop to get UK PLC firing again.
Yes, wage increases are now outstripping price rises – which on the surface looks like good news for workers.
But it could be bad for homeowners if it keeps inflation stubbornly high, and the Bank of England decides against further interest rate reductions.
Commenting on the figures, work and pensions secretary Liz Kendall said: “Since July, wages have continued to grow at pace, putting vital money back in people’s pockets as we work to make work pay and improve living standards for all.
“But these figures also show that too many people are being locked out of work and denied that chance, including those sick and disabled.
“Instead of writing people off and labelling them, we must step up our support.”
What it means for your money
Growing wages are good news for workers as it means they are getting more in their pay packets each month.
This, in turn, is good news for the government as it means more people are pumping money into the economy.
This leads to a rise in Gross Domestic Product (GDP), which is a sign an economy is healthy and doing well.
When GDP goes up, it means the economy is growing and the Government has more funds to spend on public services.
This means more money is pumped into schools, hospitals and libraries.
Taxes may also fall as the Government does not need as much money to top up its coffers.
But while rising wages are good for workers, they can also push up inflation.
To keep inflation low and stable, the Government asks the Bank of England to keep it at 2%.
The rate of inflation was 2.5% in the 12 month to December, putting it just above this target.
New figures will be released tomorrow and will show how much inflation rose in the year to January.
It is expected that inflation will peak at 3.7% this year, which the Bank of England says is due to increases in the cost of energy, water and bus fares.
Nicholas Hyett, investment manager at Wealth Club, said: “While a sudden flurry of job losses could take some heat out of the labour market – reducing inflation – the danger is that it leads to a spike in unemployment which impacts growth and the tax take, putting the government’s slim fiscal margins under yet more pressure.
“The government will be watching the next few months’ numbers through their fingers.”
Forecasts suggest inflation will reach the Bank’s 2% target towards the end of 2027, around six months later than previously thought.
The Bank of England controls inflation using its base rate.
This is the interest rate it pays to commercial banks that hold money with it and influences the rate those banks charge people to borrow money or pay on their savings.
The Bank of England chose to cut its Base Rate from 4.75% to 4.5% on February 6.
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.