Private sector wage growth has fallen below 3% for the first time since 2020, official figures show.

It means pay for people working in the private sector, at 2.9%, is rising at the slowest pace in six years, according to data from the Office for National Statistics (ONS) for the three months to May.

Money blog: Follow the latest

That means pay increases are only just keeping up with the rate of price rises, with the inflation rate at 2.8%.

Meanwhile, people working for the public sector saw annual wage growth of 5.5%, ONS data showed.

Public sector pay “remains elevated” due to the timing of recent NHS pay awards, the ONS said.

In general, weekly earnings rose faster than the month before, hitting 4.5%.

Average earnings, excluding bonuses, remained at 4.3%.

Good news for interest rates?

Seeing no change in this earnings figure will be welcome news for the interest rate setters at the Bank of England.

Wage growth had been a concern for the central bank in its fight to bring inflation down to 2%.

Spiked oil and gas costs led the inflation rate to creep up again and have led traders to price in an interest rate hike.

It would represent the first upping of the base interest rate in three years.

An improving labour market?

Data also released on Tuesday morning showed the unemployment rate remained flat at 4.9%, having come down from 5.2% in January.

Before Labour took office, the jobless rate stood at 4.2%.

While the number of job vacancies fell, the drop-off was less than in recent periods, said the ONS’s director of economic statistics, Liz McKeown.

The fall in vacancies was driven by small businesses, which cited the cost of hiring and overall expenses as the reason for not taking on new staff.