Wages increased at a faster rate than expected in May, putting pressure on the Bank of England to push up the cost of borrowing at its next meeting in August.
Earnings growth hit 7.3%, driven by the strongest rise in private sector pay growth outside the pandemic period of 7.7%, the Office for National Statistics said.
City analysts had expected wage growth to ease to 7.1%. Pay growth was also revised up for the previous month to 7.3% from 7.2%.
Speaking at the Mansion House annual dinner in the City, the Bank of England governor, Andrew Bailey, and the chancellor, Jeremy Hunt, warned wage restraint would be needed to bring down high inflation.
The governor said current levels of price and wage increases are inconsistent with reducing inflation – now at 8.7% – back to the government’s 2% target.
Despite the rise in headline wage growth, real pay when taking inflation into account was down 0.8%, the ONS data showed.
The ONS data also showed the unemployment rate increased from 3.8% to 4% and employment growth fell back, indicating that the jobs market is cooling at a faster rate than expected.
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City analysts had expected employers to keep hold of workers despite a rise in the Bank of England’s base rate to 5%.
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