Wage rate slows as unemployment falls – what it means for YOUR wallet
AVERAGE earnings have slowed in a hit for workers, new data shows.
Average weekly earnings, excluding bonuses, was 5.6% in January to March, official figures from the Office for National Statistics (ONS) show.
Annual growth in total earnings including bonuses was 5.5%.
When adjusted for inflation, annual wage growth in real terms was 2.6% for both regular pay and total pay in January to March 2025.
Meanwhile, the unemployment rate has risen in the past quarter.
The rate of unemployment for people aged 16 years and over was estimated at 4.5% in January to March 2025.
Read more on employment
This is above estimates of a year ago, and up in the latest quarter, when the unemployment rate was 4.4%.
Liz McKeown, director of economic statistics at the ONS, said: "Wage growth slowed slightly in the latest period but remains relatively strong, with public and private sectors now showing little difference.
"The broader picture continues to be of the labour market cooling, with the number of employees on payroll falling in the first quarter of the year.
"The number of job vacancies has also fallen again, with the rate of decline increasing in the last few months."
Why does inflation matter?
INFLATION is a measure of the cost of living. It looks at how much the price of goods, such as food or televisions, and services, such as haircuts or train tickets, has changed over time.
Usually people measure inflation by comparing the cost of things today with how much they cost a year ago. The average increase in prices is known as the inflation rate.
The government sets an inflation target of 2%.
If inflation is too high or it moves around a lot, the Bank of England says it is hard for businesses to set the right prices and for people to plan their spending.
High inflation rates also means people are having to spend more, while savings are likely to be eroded as the cost of goods is more than the interest we're earning.
Low inflation, on the other hand, means lower prices and a greater likelihood of interest rates on savings beating the inflation rate.
But if inflation is too low some people may put off spending because they expect prices to fall. And if everybody reduced their spending then companies could fail and people might lose their jobs.
See our UK inflation guide and our Is low inflation good? guide for more information.
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