UK wages grow by 5.9% as job vacancies tumble

Wages in the UK have continued to grow, buoyed by recent pay increases in the public sector, even as the number of job vacancies has dropped to its lowest level since the Covid-19 pandemic, according to official figures released by the Office for National Statistics (ONS).

Data from the ONS showed that average weekly earnings, excluding bonuses, rose by 5.9% in the three months leading up to February 2025. This figure was unchanged from the previous quarter, which had already marked the highest level of wage growth since April 2024. When bonuses were included, total pay growth stood at 5.6%, aligning with market expectations.

Despite the continued strength in wage growth, the availability of jobs worsened. The number of vacancies fell to 781,000 in the three months to March 2025, marking the lowest level since before the pandemic and dropping below pre-Covid levels for the first time.

Even after adjusting for inflation, wages have continued to grow. Real wages—wages accounting for inflation—increased by approximately 3% over the same period, or 2.8% including bonuses. The boost was partly helped by a surprise dip in inflation to 2.8% in February, driven by a drop in clothing and footwear prices—the first time those prices had fallen in more than three years.

The sustained rise in earnings, particularly in the public sector, will likely be an important factor for the Bank of England as it prepares for its interest rate decision next month. The current base rate stands at 4.5%, and policymakers will weigh wage trends alongside inflation when deciding whether to make a cut.

The UK unemployment rate remained unchanged at 4.4%, according to the latest survey data. Meanwhile, the employment rate for those aged 16 to 64 stood at 75.1%. Last year, the Labour Party stated its goal of increasing this employment rate to 80%.

Liz McKeown, Director of Economic Statistics at the ONS, commented: “Regular pay growth remains strong, having increased slightly in the latest period. Growth accelerated in the public sector as previous pay rises fully fed through to our headline figures, while pay in the private sector was little changed. The latest survey results estimate that the unemployment rate is unchanged on the previous three months, while separately the number of employees on payroll fell slightly over the same period.”

Monica George Michail, Associate Economist at the National Institute of Economic and Social Research (NIESR), said the recent rise in the national minimum and living wage in April is expected to keep earnings growth high in the near term. However, she warned that with growing uncertainty in the economic outlook and slower hiring trends, wage pressures could ease over time.

Matt Swannell, Chief Economic Adviser at the EY Item Club, added a note of caution, pointing out that data accuracy issues continue to pose challenges in interpreting the true state of the labour market. He noted that while the unemployment rate remained at 4.4%, the number of payrolled employees declined and job openings fell as well. Swannell also warned that increased tariffs from the United States and associated economic policy uncertainty could lead to slower GDP growth in the UK and a potential rise in unemployment in the coming months.