Wages grew faster than inflation for the first time in almost a year in February and the jobless rate fell to just 4.2 per cent according to the latest official data.
The Office for National Statistics reported that weekly average earnings were up 2.8 per cent in the three months to February on a year earlier, higher than the 2.7 per cent rate of consumer price inflation in that month.
Real wages turned negative in April 2017 as inflation jumped due to the plunge in the pound in the wake of the Brexit vote.
“Wage growth has been the missing piece of the puzzle in Britain’s long, slow recovery from the financial crisis,” said Tom Stevenson of Fidelity International.
“With the final piece now in place the Bank of England now has the catalyst to be able to follow through on its plans to raise interest rates at the next MPC meeting in May and start the move back towards monetary normality.”
Others said the optimism about pay ought to be guarded.
“It’s good to see pay finally back in positive territory, but Britain has a lot of ground to make up after an awful decade of pay squeezes, stagnation and all too fleeting recoveries. On average, people are still taking home less than they did before the crisis,” said Stephen Clarke of the Resolution Foundation think tank.
The wages data was also weaker than the 3 per cent growth that many City of London analysts had anticipated, sending sterling down to $1.4325, as some traders pulled back their bets slightly on a May interest rate hike from the Bank of England.
Real wages rising again
Meanwhile, the unemployment rate for the three months to February ticked down to 4.2 per cent, from 4.3 per cent previously. City analysts had expected it to be unchanged.
The employment rate rose to a new record high of 75.4 per cent.
According to the ONS the number of people in jobs rose by 55,000 over the period, while the numbers out of work fell by 16,000.
The work and pensions secretary Esther McVey heralded the figures as evidence of the continuing strength of the UK jobs market.
“Day by day we are helping people turn their lives around by getting them into employment. Jobs are key to transforming lives and work is the best route out of poverty,” she said.