Higher interest rates from the Bank of England have moved a decisive step closer after the latest official figures showed earnings growing at their fastest rate in more than two years.
The latest snapshot of the labour market from the Office for National Statistics showed that a record high level of employment and a drift from part-time to full-time work pushed up wages in the three months ending in January.
With inflation falling, the ONS said the squeeze on living standards that has dampened consumer spending over the past year had come to an end if bonuses were included in the yardstick used to calculate earnings.
Threadneedle Street’s monetary policy committee is meeting to discuss interest rates this week and the prospect of an increase in borrowing costs pushed up the pound on the foreign exchanges. An increase in May is thought more likely than one this week.
The ONS said that including bonuses average earnings in the three months ending in January were 2.8% higher than in the same quarter a year earlier, the highest since September 2015. Excluding bonuses earnings were 2.6% higher.
UK wage growth accelerates as employment rate hits record high – business live
The annual inflation rate has been coming down from a peak of 3.1% hit last autumn and stood at 2.7% in February.
“Latest estimates show that average weekly earnings for employees in Great Britain in real terms – that is, adjusted for price inflation – fell by 0.2% excluding bonuses, but were unchanged including bonuses, compared with a year earlier,” the ONS said.
It added that both employment and unemployment rose in the three months ending in January, with the labour market not quite able to absorb a big increase in the number of people entering the workforce after being classified as economically inactive.
The number of people in work rose by 168,000 to 32.25 million, pushing up the employment rate to 75.3%, the joint highest since comparable records began in 1971.
Unemployment on the internationally agreed measure rose by 24,000 in the three months to January, but the jobless rate remained unchanged on the previous quarter at 4.3%.