This is the highest level recorded since records began in 2001 but there was also a fall in the economic activity rate.

Including bonuses the rate was 8.2% over the last year, however this figure also includes a one-off bonus payment made to NHS employees in June.

In real terms and with inflation taken into account, wages were still up, by 0.5% for pay including bonuses and 0.1% for regular pay, according to the Office for National Statistics (ONS).

Workers in the private sector saw an average growth of 8.2%, the highest figure outside of the coronavirus pandemic period, while those in the public sector saw a rise of 6.2%, the highest since October 2001.

Average weekly earnings were £663 including bonuses and £613 without in June. This is an annual increase from £614 and £572 in June 2022.

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There was a fall of 0.1 percentage points to 20.9% in the economic inactivity rate and the ONS said this was largely due to people looking after family members. The number of people who are inactive because of long-term sickness increased to a record high.

Over the second quarter of the year, the unemployment rate rose by 0.3 percentage points to 4.2% from the previous quarter. The overall employment rate fell 0.1% to 75.7% over the same period.

It comes as inflation has also begun to ease, falling to 7.9% in July, but it still remains significantly higher than the Government’s 2% target.

High inflation has also resulted in the Bank of England (BoE) base rate rising consistently to its current level of 5.25%. The boost in wages will be a welcome relief to households amid the cost-of-living crisis but the fall in economic activity could see the BoE pushing up rates further at its next meeting.

The Chancellor of the Exchequer, Jeremy Hunt, responded to the figures and said: “Thanks to the action we’ve taken in the jobs market, it’s great to see a record number of employees.

“Our ambitious reforms will make work pay and help even more people into work – including by expanding free childcare next year – helping to deliver on our priority to grow the economy.”

‘Pay has finally pushed ahead of inflation’

Sarah Coles, head of personal finance for Hargreaves Lansdown, said: “Finally, we’ve stopped getting poorer with each passing month, as wages have returned to growth after inflation. However, this is the bright spot among a fairly dismal employment picture, and even this could bring more bad news further down the line.

“Wages finally returned to growth after inflation. For the vast majority of people this is a big relief. After almost 18 months of getting gradually poorer with each passing month, pay has finally pushed ahead of inflation. As price rises continue to slow, there’s a reasonable chance we’ll start to feel very marginally less cash-strapped as we go through 2023.

“However, it will be far less welcome for the Bank of England. Since the period of higher inflation started, there was always the risk that wages would need to rise to help people make ends meet, and that it would end up fuelling even more inflation. These figures may add to their concerns. It means we may well see another rate rise when the committee next meets. This raises the prospect that it could exacerbate growing weakness in the jobs market.”