Wages hikes raise the spectre of inflation
The ONS has released employment and wage data covering the year to October-December: UK Labour Market February 2025 – GOV.UK
Sarah Coles, head of personal finance, Hargreaves Lansdown: “Wages have outpaced inflation again, easing the pressure on budgets and making life a little more comfortable. However, we can’t afford to relax just yet, because wage hikes raise the spectre of inflation, which could be lurking around the corner, ready to ambush the unwary.
Higher wages are giving us more wiggle room in our budgets, and the HL Savings & Resilience Barometer says the average household now has £136 left at the end of the month. It’s a far cry from the peak of the cost-of-living crisis when the question was how much month we would have left at the end of the money. And this won’t be the last of it, given the public sector wage rises and minimum wage hikes on the cards in April.
However, 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.
Jobs
It was a mixed picture for jobs, with employment and unemployment both rising – and vacancies having fallen every month for almost three years. The hike in employers’ taxes in April is likely to be playing a part in keeping a lid on jobs, and there could be more pain to come.
It makes this a sensible time to take stock of the protection you have in place if things take a turn for the worse. You should have emergency savings to cover 3-6 months’ worth of essential spending, and while the HL Savings & Resilience Barometer shows that savings have been increasing over the past six months, a third of people are still falling short. It means if you’re finding yourself with a bit more cash left at the end of the month, and you can afford to put aside a little more for emergencies, now might be a great time to start.”