UK pay continued to grow much faster than inflation in the three months to February, though the jobs market showed signs of slowing down.
The average regular earnings excluding bonuses rose 5.9% in the period on an annual basis, according to data from the Office for National Statistics (ONS), easily outstripping inflation, which came in at 2.8% in February. That was up slightly from 5.8% in the three months to January, which was revised down from 5.9%.
Annual growth in real terms — adjusted for inflation — was down slightly, at 2.1%, compared with 2.2% for the 12 months to January.
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There were 781,000 job vacancies between January and March, according to estimates from the ONS, which was down 26,000 on the previous three months. It was the first time since the period between March and May of 2021 that there have been less openings than there were before the pandemic.
Early estimates showed that the number of payrolled employees fell by 78,000 in March, following a fall of 8,000 in February.
The unemployment rate came in at 4.4%, which was unchanged from the previous quarter.
ONS director of economic statistics Liz McKeown said: “Regular pay growth remains strong having increased slightly in the latest period. Growth accelerated in the public sector as previous pay rise fully fed through to our headline figures, while pay in the private sector was little changed.”
These latest figures came ahead of increases in employer national insurance contributions and the national minimum wage, which applied from early April, having been announced in the autumn budget.
Ashley Webb, UK economist at Capital Economics, said that “while wage growth remains too high, the growing downside risks to inflation and activity from higher US tariffs may mean the Bank of England (BoE) starts to become less worried about the upside risks to inflation from pay growth and more worried about the downside risks to activity.
“The risk is that interest rates are cut a bit faster than the fall from 4.50% now to 4.00% this year that we expect.”
The BoE kept interest rates unchanged at 4.5% in March, amid mixed signals from the UK economy and concerns around US president Donald Trump’s tariff plans. The central bank is due to deliver its next interest rate decision on 8 May, with expectations growing that it will cut rates next month as fears remain that Trump’s tariff blitz will ignite a global recession.
“The BoE must weigh up signs of a slowing economy with the risk that robust pay growth and relatively low unemployment could sustain consumer spending and make inflation harder to quell,” said Rob Morgan, chief investment analyst at Charles Stanley.
“However, the bigger issue now is the probable global growth slowdown resulting from tariffs on a wide range of imports into the US.
“Tariffs pour cold water on economic growth, making businesses delay investments and consumers more cautious with their spending. With this backdrop UK growth is likely to remain well below where the government wants it to be.
“With clear risks to the economy there is a good chance the BoE will make a precautionary cut to interest rates in May, especially as other trends such as the lower oil price stand to reduce inflation pressures in the medium term.”
Sanjay Raja, chief UK economist at Deutsche Bank, said that the BoE’s monetary policy committee has the “green light to cut the bank rate in May. Trade uncertainty remains rife. And slack in the labour market is emerging.”
Raja added: “Importantly, given the lags in monetary policy transmission, the [monetary policy committee] can and should continue to put more weight on labour market developments as opposed to short-term inflation dynamics.”
Original Article: Yahoo Finance
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