UK wage growth held steady at 5.9 percent in the three months to April, bolstered by a rise in the minimum wage, despite signs of a slowing jobs market, according to official data released on Tuesday.

The Office for National Statistics (ONS) reported that the annual growth in average weekly wages, including bonuses, remained at 5.9 percent, unchanged from the revised figure for the previous three months.

Excluding bonuses, the growth rate was also steady at 6 percent, aligning with analysts’ expectations.

However, the data also indicated a cooling labour market. The unemployment rate increased slightly, the number of payrolled employees and job vacancies declined, and there was a rise in claims for jobless benefits.

Economists noted that the figures are consistent with the Bank of England’s (BoE) latest projections and are unlikely to alter the current interest rate outlook.

The BoE’s Monetary Policy Committee (MPC) might need more concrete evidence of easing inflation before considering rate cuts from the current 16-year high of 5.25 percent.

What does the future look like?

Rob Wood from Pantheon Macroeconomics commented, “It’s not a slam dunk. Cutting rates with pay growth as strong as this would be unusual.” He suggested that the MPC could potentially cut rates by August if wage growth and services inflation slow down, but might delay until September if the data remains ambiguous.

Ellie Henderson, an economist at Investec, remarked, “The BoE is likely to take this data as a sign that labour market conditions are easing, but private sector regular pay growth remains a key roadblock to returning inflation to target.”

The reliability of the ONS’s headline measures of unemployment and employment has been questioned due to issues with the underlying labour force survey. The unemployment rate on this measure rose to 4.4 percent in the three months to April, up from 4.3 percent in the previous three months, while the employment rate fell to 74.3 percent, lower than a year ago. This suggests a contraction in the UK workforce, now smaller than pre-pandemic levels.

Tony Wilson, director of the Institute for Employment Studies, highlighted that the number of people in work had decreased for the first time since Margaret Thatcher’s first term, with a drop of 40,000 since Boris Johnson’s 2019 victory, contrasting with job gains of nearly 4 million over the previous decade.

A different perpective

Despite these trends, other employment measures provide a different perspective. HM Revenue & Customs tax records indicate a steady rise in the number of people on payrolls from just over 29 million at the start of 2020 to 30.3 million in May, with only a slight recent dip. Additionally, a separate ONS survey of employers showed an increase of 431,000 jobs over the year to March, driven primarily by public sector hiring, especially in health.

All measures, however, agree that the job market has softened recently. Vacancies have decreased by a third since the 2022 peak, standing at 904,000, though still higher than pre-pandemic levels.

Ruth Gregory from Capital Economics noted that the persistent wage growth is a “lingering concern” for the BoE but attributed it partly to April’s 9.8 percent rise in the statutory minimum wage, suggesting it may not necessarily prevent an interest rate cut in August.

 

 

 

 

Avatar

Amelia Brand is the Editor for HRreview, and host of the HR in Review podcast series. With a Master’s degree in Legal and Political Theory, her particular interests within HR include employment law, DE&I, and wellbeing within the workplace. Prior to working with HRreview, Amelia was Sub-Editor of a magazine, and Editor of the Environmental Justice Project at University College London, writing and overseeing articles into UCL’s weekly newsletter. Her previous academic work has focused on philosophy, politics and law, with a special focus on how artificial intelligence will feature in the future.