UK pay growth rose in November, official figures show, keeping pressure on the Bank of England to hold interest rates amid concerns over lingering inflationary pressures.

With the government under pressure on the economy, the Office for National Statistics (ONS) said annual growth in average weekly earnings rose by 5.6% in the three months to the end of November, up from 5.2% in the three months to October.

City economists had forecast total annual pay growth would accelerate. The reading matched estimates for total pay, but was marginally higher than expected for regular pay, excluding bonuses.

The figures also showed the UK unemployment rate for people aged 16 and over rose to 4.4% in the three months to November, up from 4.3% in the three months to October, highlighting some evidence of a cooling jobs market.

Ashley Webb, a UK economist at the consultancy Capital Economics, said: “While the further rise in regular private sector pay growth in November will cause the Bank of England some unease, it will take comfort from the continued loosening in labour market activity.”

After turbulence in financial markets earlier this month, the latest snapshot is likely to complicate the picture for the chancellor, Rachel Reeves, amid warnings that higher borrowing costs could require tax increases or spending cuts to avoid her breaking her fiscal rules.

The figures will be closely watched by the Bank as it considers whether to cut interest rates from the current level of 4.75% on 6 February.

Expectations for a cut had risen after better-than-expected inflation data last week, but experts warn stronger pay growth could stoke higher prices. Financial markets rated the probability of an interest rate cut next month at 84% on Tuesday.

Threadneedle Street is monitoring Britain’s jobs market for evidence of inflationary pressures, amid concerns that robust pay growth could lead companies to put up their prices to accommodate rising wage bills.

Several of the Bank’s policymakers warn that pay growth remains above levels considered to be consistent with its 2% inflation target. Others say generous pay deals are unlikely to persist for much longer as the recent high period of inflation fades in the rear-view mirror, and as growth in the UK economy slows.

According to the ONS figures, private sector pay growth drove the increase in average weekly earnings, with a jump from 5.4% to 5.8%, while public sector pay growth eased from 4.2% to 4.1%.

When inflation is taken into account, the ONS said the total 5.6% annual pay increase in the three months to November was worth 3.2%, the highest outside the pandemic since 2007.

Analysts said the rise in unemployment showed companies had grown cautious about hiring after Reeves’s budget. Data from HMRC showed the number of employees on company payrolls dropped by 47,000 in December, the biggest fall since November 2020 and after a 32,000 drop a month earlier.

The number of vacancies fell by 24,000, dropping for a 30th consecutive month. However, the number of job openings remains higher than before the pandemic.

Business leaders have warned that Reeves’s planned £25bn increase in employers’ national insurance contributions and 6.7% rise in the minimum wage from April could stoke inflationary pressures by forcing companies to pass on higher prices to consumers. However, the changes adding to unemployment would have the opposite effect by cooling wage growth.

Economists said there were signs of the labour market growth cooling. Early estimates for December from HMRC data indicate that median monthly pay increased by 5.6%, down from 6.4% in November.

“The full impact of the changes to national insurance and the minimum wage, announced at the budget, won’t be fully seen until later in the year. However, the warning lights on recruitment, employment and training are already flashing,” said Jane Gratton, the deputy director public policy at the British Chambers of Commerce.

Liz Kendall, the work and pensions secretary, said: “Today’s figures are more evidence that we must get Britain working, which is why this government is relentlessly focused on driving up opportunity and driving down barriers to success in every part of the country.”

The Bank has been grappling with issues with the quality of the UK’s official jobs market statistics, which experts have warned leaves policymakers “flying blind” with the prospect that decisions are being taken based on flawed data.

The ONS last month admitted it could take until 2027 to replace its faulty labour force survey, which has suffered from low response rates and a badly handled transformation programme.