UK average earnings grew 5.2% in the three months to February 2026, according to ONS data released Tuesday, beating City forecasts of 4.8% and suggesting that the labour market remains more resilient than many expected following last autumn's increase in employer National Insurance contributions.
The Labour Market Picture
Employment rose by 128,000 in the latest quarter, against a forecast of 80,000. The unemployment rate held steady at 4.3%. The number of job vacancies fell slightly, to 875,000, but remains above pre-pandemic levels.
The Wage-Inflation Risk
Wage growth of 5.2% — well above the 4% the Bank of England considers consistent with 2% inflation in the medium term — complicates the picture for rate-setters. Even as headline inflation falls, persistent wage growth risks feeding through into services prices and keeping underlying inflation elevated.
The Bank's Chief Economist noted that the data "cut both ways" — healthy employment and wages were good news for households, but the pace of wage growth was incompatible with sustained return to the inflation target.
Sector Variations
Wage growth is not uniform. Private sector earnings are growing at 5.6%; public sector at 4.1% following this year's settlements. Within the private sector, the strongest growth is in technology and professional services; the weakest is in retail and hospitality, where the minimum wage increase has driven up the floor but left less room for growth above it.
