Pay rises failing to keep up with the cost of living, ONS figures show

Average pay rises are failing to keep up with the rising cost of living, official figures show – as the squeeze on UK households tightens.

In real terms, pay for workers in Britain has fallen for the first time in more than a year, as increases in pay packets lagged behind soaring inflation.

Excluding bonuses and adjusted for inflation, regular pay fell 1% in November compared with the same month the previous year.

Wages rose in the year to November, but not as fast as prices over the same period.

Figures from the Office for National Statistics (ONS) revealed that average wage growth, including bonuses, rose by 4.2% in the three months to November.

But with inflation hitting an eye-watering 5.1% in November, this means real wages did not keep up with the rising cost of living for the first time since July 2020.

“Salaries are growing reasonably strongly, but some people are saying they are not feeling much better due to rising prices,” the ONS told the BBC.

Sky-high energy bill increases are adding to rising costs across the board, and pressure is mounting on the government and the Bank of England to help ease the UK’s growing cost-of-living crisis.

Chancellor Rishi Sunak acknowledged “challenges with inflation” but said wage growth was “relatively healthy” by historical standards.

He said it was “a global phenomenon”, adding: “The causes of inflation - whether it is supply chains or energy prices - are of course global in nature. But we are taking action to support people as best we can.”

Tomorrow, official data is expected to show inflation edging higher still in December to 5.2%, with experts warning falls in real wages will only get worse as the Consumer Prices Index is set to hit 6% by April.

The data has laid bare the toll of recent soaring prices on household finances. Martin Beck, chief economic adviser to the EY Item Club, said the fall in real wages was an “unwelcome development which is likely to worsen over the next few months”.

The Resolution Foundation think tank said: “Real wages officially began to fall in November, and the current period of shrinking pay packets is likely to get worse before it starts to ease in the second half of 2022.”

The latest ONS figures also showed there was no sign of a jobs hit from the Omicron variant of coronavirus sweeping the UK, with a record rise in payrolled workers.

The number of workers on UK payrolls jumped by 184,000 month on month, or 0.6%, in December to 29.5 million.

The number of people employed is now 1.4%, or 409,000, above levels seen before Covid.

The figures also revealed that the unemployment rate for the three months to November fell back almost to where it was before Covid, to 4.1% from 4.2% in the previous quarter and close to the 4% level seen in the last pre-pandemic quarter.

Unemployment fell 128,000 to 1.38 million quarter-on-quarter in the three months to November, while employment lifted 60,000 to 32.5 million, the ONS said.

Rishi Sunak hailed the figures as “proof that the jobs market is thriving.”

Some economists believe the Bank will hike interest rates again as soon as early next month to rein in rampant inflation, hot on the heels of its December rise from 0.1% to 0.25%.

James Smith, an economist at ING, said: “At face value, the UK jobs market looks much like it did pre-pandemic. Taken with rising headline inflation, that makes a February rate hike look more likely.”

He is pencilling in two increases overall in 2022.

The buoyant jobs data has given the Bank further room to act, showing strength in the face of Omicron and the end of furlough last September, with the ONS revealing the redundancy rate fell to a record low in the three months to November.

The number of vacancies also surged to a fresh high of 1.25 million in the quarter to December - 128,000 more than the previous three months and 462,000 above the pre-Covid level as firms battled to secure workers.

The figures suggested staff shortages may finally be easing, however, with a slowdown in vacancies growth, falling from more than 180,000 in the previous three months.