Wage rate slows as unemployment rises – what it means for YOUR wallet
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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.
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New figures reveal how much earnings and unemployment have fallen
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.
This is above estimates of a year ago, and up in the latest quarter, when the unemployment rate was 4.4%.
But the rate of economic inactivity for people aged 16 to 64 years was estimated at 21.4% in the last quarter.
This is below estimates of a year ago and down in the last three months.
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."
Understanding GDP and Its Impact on the Economy
What it means for your money
Generally speaking, lower wages are a negative for the economy, especially if they are lower than the rate of inflation.
It means households have less purchasing power and less money will go back into the economy.
Experts have blamed changes announced by Chancellor Rachel Reeve's in the Budget last October for the fall in wage growth.
In the Budget the Chancellor announced that the rate of employer National Insurance contributions would rise from 13.8% to 15% on April 6.
Alice Haine, personal finance analyst at Bestinvest, said: 'UK pay growth eased back in the three months to March as businesses braced for Chancellor Rachel Reeve's National Insurance rate hike for employers and the minimum wage increase at the start of April."
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.
At the same time, the National Minimum Wage rose, piling further pressure onto businesses already struggling with rising costs.
Do you have a money problem that needs sorting? Get in touch by emailing money-sm@news.co.uk.
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