Private sector pay increased on average by just 3.4% in December, according to the latest official labour market data released on Tuesday, the same as the rise in inflation at the end of last year.

No wonder the vast majority of workers are feeling the winter blues. Their incomes, adjusted for rising shop prices, have flatlined, leaving them no better off than they were a year earlier.

The most recent surveys of consumer confidence reveal a dismal picture of households worried about growing debts and shrinking savings now that their incomes have flatlined.

There is also the looming threat of redundancy or more likely, the prospect of rival firms putting a block on hiring, which forces workers to stay in their current, possibly not very well-paid job.

Unemployment rose to a fresh five-year high of 5.2% in the three months to December 2025, the Office for National Statistics said, reflecting a reluctance among employers to hold on to staff with little to do, in the hope of better times, or hire new people.

Hospitality and retail businesses blame the government for increasing business rates. Professional services firms say their investments in artificial intelligence make them think twice before advertising new jobs.

Either way, at the end of last year, the UK employment market was a gloomy place for the average worker to go job hunting.

In this environment, there would usually be some relief courtesy of the Bank of England. Officials in Threadneedle Street would be cutting interest rates to give the economy a lift.

However, at its most recent meeting, the Bank’s monetary policy committee (MPC) held interest rates at 3.75% after a majority of the committee said they needed to be sure of eradicating rising inflation before they helped the economy.

The economy expanded by only 0.1% in the three months to December, indicating that the UK’s growth rate was stagnant, much like the real wages growth of workers in the private sector.

One of the extra costs faced by homeowners since the pandemic has been the jump in mortgage payments once they switch fixed-rate deals. Millions of homeowners have left behind mortgages with a 1.5% interest rate to sign contracts for 4% or more, adding hugely to their monthly bills.

The Bank might have helped bring this cost down, at least for the many hundreds of thousands who will need to remortgage this year and also those who will in years to come.

Consumer confidence is forward-looking. People think about rising mortgage payments, job insecurity and the likelihood of a decent pay rise when pollsters ask them how they feel about their personal finances.

For Rachel Reeves there is the potential for a turnaround this year. The jobs data showed a rise in the number of people finding a job after a long period of inactivity. The claimant count also fell from a year ago, indicating that fewer people are claiming work-related benefits.

More broadly, inflation is on track to fall and once that trend is considered to be fixed by the MPC, interest rates will fall again.

By the end of the year, the UK could be in a much better place. But, if the cost of all this is persistently high unemployment, it is unlikely anyone will thank the chancellor.