Latest Employment and Wage Growth Data

Kevin Brown, savings specialist at Scottish Friendly, comments:

The latest figures for the first three months of the year show that total wage growth reached 7%. High bonus payments are behind much of this increase, but employees are also seeing their regular pay go up, particularly in the private sector.

This is good news for workers as inflation could rise again to as high as 9% in April which will stretch household incomes even further. On the face of it wages may be rising sharply, but in reality, with the effects of inflation taken into account real wage growth stands at just 1.4% for Q1 2022.

Nonetheless, rising wages do pose a real risk to the economy and subsequently consumers. The Bank of England fears that a highly competitive jobs market and demands from employees for pay increases to keep up with rising living costs, could lead to a dramatic and sustained wage / price spiral.

This could keep inflation closer to double figures rather than the Bank of England’s 2% target for longer and ultimately it will hinge on how employers manage the situation over the coming year. If businesses do increase wages and push prices up to recoup increased costs, then higher inflation remains far more likely.

It is a difficult catch 22 for many hard-pressed consumers as they desperately try to cope with rising price,s but household finances could end up being squeezed even tighter as a result.