The average earnings for workers between October and December grew by 5.9% on the previous year excluding bonuses, while, with bonuses included, growth reached 6%, according to the Office for National Statistics (ONS). This is a rise from 5.6% for the previous period.
Adjusted for the Consumer Prices Index rate of inflation, wages still grew by 2.5% both with and without bonuses included.
There was also a 6.2% annual growth in the earnings of employees in the private sector, with the public sector also increasing year-on-year by 4.7%.
It’s the third successive month in which wages have grown for UK workers, as unemployment levels stayed at 4.4% for the second time in a row.
While unemployment levels remained the same between October and December, there was a 1.1% fall in the number of job vacancies in the market between November 2024 and January 2025 – leaving the number of estimated job vacancies at 819,000. This is the 31st consecutive period in which there has been a decrease in available jobs on the market.
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The data collected by the ONS is an estimate and is based on surveys of businesses and those in and out of work, meaning the figures rely on the number of responses it can gather from both parties.
The think tank warned that, due to a smaller response size, employment estimates are not as reliable.
‘Can’t afford to relax just yet’
While the earnings of employees outpacing inflation appears good news for your money going further, “we can’t afford to relax just yet”, according to Sarah Coles, head of personal finance at Hargreaves Lansdown.
Coles said this is because “wage hikes raise the spectre of inflation, which could be lurking around the corner, ready to ambush the unwary.”
She added: “With inflation figures expected to show a rise tomorrow and forecast to be back on an upwards trajectory, higher wages aren’t unalloyed good news; there’s the risk they’ll power more price rises.
“We’re still a world away from the double-digit inflation we’ve lived through in recent years, and it’s more a question of whether it will delay interest rate cuts rather than risking rises, but it’s not going to give us the confidence to spend our way to economic growth in a hurry.”
‘Calm before the storm’
With National Insurance contribution (NIC) hikes for employers and pay rises set for millions of employees in April, Danni Hewson, head of financial analysis at AJ Bell, said employment levels “are enjoying the calm before the storm.”
Hewson said: “Big black clouds are swirling on the horizon if you factor in all the surveys and data from recruitment agencies, which suggests that businesses are cutting back on their hiring intentions for the year and will consider job cuts and smaller wage hikes after April.
“The pressure of those National Insurance changes coupled with an increase in the National Living Wage is being considered a tax on jobs, and the big question is how bad the post-Budget weather will really get and whether the UK jobs market is sufficiently robust to ride it out.
“Vacancy numbers have been steadily falling back from post-Covid highs, though the number of positions available is still higher before that first lockdown, and, looking at early estimates of January’s payroll numbers, there is cause for a bit of optimism.”
Hewson added: “Today’s surprisingly robust figures are already having an impact on market expectation for future interest rate cuts, with the MPC carefully monitoring wage growth figures and trying to balance strength there against dismal economic growth. Central bankers will be hyper aware of the tightrope they walk and the lag between their action and the impact on households.
“Markets had broadly priced out a cut at the next Bank of England meeting even before today’s data, but expectation of a cut has dwindled further with less than 23% now thinking that a quarter percentage point cut might be on the cards in March.”
