Sign in Subscribe
Banks (Finance)

Interest Rates Pressure Mounts as Wages Surpass Expectations

Strategic Insights

— 2 min read

The Bank of England is under increasing pressure to raise interest rates next month after a significant jump in wages was reported in June. The total pay, including bonuses, rose by 8.2% a year in the three months to June, exceeding the expected 7.3% growth. Regular pay, which does not include bonus payments, reached its highest annual growth rate since 2001, rising by 7.8% in the quarter. Meanwhile, the number of redundancies increased, and the unemployment rate rose to 4.2% in the quarter. The government's one-off payment to NHS workers and a deal with the public sector also contributed to the wage growth.

Key Takeaways:

  • Total pay, including bonuses, rose by 8.2% a year in the three months to June, surpassing the expected 7.3% growth.
  • Regular pay, excluding bonus payments, rose by 7.8% in the quarter, reaching the highest annual growth rate since 2001.
  • Workers in the IT industry, the City, and business services such as marketing and advertising saw the biggest gain in earnings, with a 9.4% increase in pay.
  • Policymakers at the Bank of England pushed the cost of borrowing to 5.25% earlier this month, the 14th consecutive interest rate rise.
  • The unemployment rate rose to 4.2% in the quarter, with the number of redundancies increasing.
  • The government's one-off payment to NHS workers and a deal with the public sector contributed to the wage growth.
  • The Office for National Statistics (ONS) reported that the number of redundancies increased and the unemployment rate rose three percentage points in the quarter.
  • The City consultancy Capital Economics stated that the accelerating wage growth supports the case for one more rate increase from the Bank of England next month.
  • The finance and business services sector saw earnings rise by 9.4%, while manufacturing workers' pay increased by 8.2%.
  • Public sector pay increased by only 6.2%, lifted by a deal with the government in April.

Statistics:

  • Total pay, including bonuses, grew by 8.2% a year in the three months to June.
  • Regular pay, excluding bonus payments, rose by 7.8% in the quarter, the highest annual growth rate since 2001.
  • The number of redundancies increased in the quarter.
  • The unemployment rate rose to 4.2% in the quarter.
  • Earnings in the IT industry, the City, and business services grew by 9.4%.
  • Public sector pay increased by 6.2% in the quarter, lifted by a deal with the government in April.
  • Inflation is expected to fall to about 6.8% in the year to July, down from 7.9% in the year to June.

Sources:

  • Office for National Statistics (ONS)
  • Capital Economics
  • The Bank of England
  • The Guardian
  • The Times

Read more