Wages are rising, but prices are rising much faster, resulting in a record 2.8% fall in regular pay in real terms.
With inflation set to rise even further from here, there looks to be little prospect of the salary squeeze abating any time soon, leaving household finances firmly under the cosh.
Laith Khalaf, head of investment analysis, AJ Bell, comments on the latest Labour Market Statistics published by the ONS this morning:
“The divergence between public and private sector pay also provides some context for the industrial action we are beginning to see emerge in certain sectors. Growth in total pay, including bonuses, was 6.2% on average across the entire UK workforce. But there is a stark comparison between private sector wages, which rose by 7.2%, and public sector pay, which went up just 1.5%.
“It seems the government is exercising pay restraint in the face of runaway inflation, but the private sector is not. That’s hardly surprising given the obvious pressures on recruitment that companies are facing. Job vacancies stand at almost 1.3 million, slightly greater than the number of unemployed people. That means if everyone seeking a job could be matched up with a vacancy, ignoring their location and skills, there would still be a shortfall.
“Against such a backdrop it’s no wonder businesses are willing to cough up more to get new staff and keep existing employees on the books. The number of vacancies fell very slightly on the last reading, which means we may have just crested off the back of the peak and could start to see some normalisation of the labour market. But the big concern is that the higher wages paid by the private sector will serve to entrench inflation, while the small pay rises witnessed in the public sector in the face of soaring prices will continue to stoke industrial tensions.”