UK workers have seen their real wages stay flat for the first time since October 2021, as pay growth matched inflation at 7.8% in the three months to July, according to official figures.
The Office for National Statistics (ONS) said average regular weekly earnings growth remained at a record high, while total pay including bonuses rose by 8.5%, outstripping inflation for the first time since March 2022.
However, the labour market showed signs of cooling, as unemployment rose to 4.3%, the highest since late 2021, and employment fell by 207,000, the steepest drop since autumn 2020.
The number of vacancies also fell below one million for the first time since summer 2021, while the number of workers on payrolls edged lower in August.
The strong wage growth will likely increase pressure on the Bank of England to raise interest rates again next week, as it tries to bring inflation back to its 2% target.
But some economists warned that the Bank faces a dilemma, as the jobs market is clearly on the turn after 14 rate rises in a row.
The TUC said the UK economy was in the danger zone and urged the Government to take action.
The Chancellor said he was heartened by the high wage growth and low unemployment compared to other countries, but stressed the need to stick to his plan to halve inflation.
The ONS figures also revealed that the state pension is set to rise by 8.5% next April under the triple lock guarantee, although this could be revised later.
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