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UK pay growth rose once again in the final quarter of last year, adding to concerns about persistent inflationary pressures.
UK average weekly earnings climbed by 5.9% in the three months to December on an annual basis, up from 5.6% in the previous three months, according to data from the Office for National Statistics. Wage growth continued to outstrip inflation, which unexpectedly fell in December but was still above target at 2.5%.
Meanwhile, annual average earnings – adjusted for inflation – were up 2.5% from the previous year, marking the fastest growth since the summer of 2021.
ONS director of economic statistics Liz McKeown 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 number of employees on payroll was broadly unchanged in the last three months of the year, continuing a medium-term trend of slowing growth.
"The number of vacancies also continued to fall in the latest quarter, albeit slowly, with the total number remaining a little above its pre-pandemic level."
The employment rate stood at 4.4% in final quarter of last year, which was unchanged from the three months to November.
The number of payrolled employees fell by 14,000 between November and December, following a fall of 32,000 between October and November, though this figure was up by 44,000 for the whole year.
There were 819,000 job vacancies from November to January, according to the ONS, down 9,000, from the August to October period.
Richard Carter, head of fixed interest research at Quilter Cheviot, said that the "slight acceleration in earnings growth may complicate the Bank of England’s decision-making, as it must balance concerns over a slowing economy with the risk that strong pay growth could sustain consumer spending and slow disinflation.
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“The upcoming changes to employer national insurance contributions are also expected to weigh on hiring decisions, and today’s data suggests businesses may already be adjusting their workforce strategies to manage higher costs.