By David Milliken
LONDON (Reuters) -British annual wage growth, excluding bonuses, was slightly higher than expected at 5.0% in the three months to May, official figures showed on Thursday while a sharp drop in employee numbers was much less drastic than first reported.
Overall, the figures suggest Britain’s labour market is cooling, but perhaps less rapidly than the Bank of England had expected.
Economists polled by Reuters had a median forecast that regular pay growth would slow to 4.9% from a rate of 5.2% originally reported for the three months to the end of April.
The April figure for pay growth was revised up slightly to 5.3%, while a provisional estimate that employee numbers dropped by 109,000 in May – the largest drop since the pandemic – was scaled back significantly to a drop of 25,000.
June’s fall in employee numbers was provisionally estimated at 41,000. The figures published by the Office for National Statistics come from tax office data.
The Bank of England is closely watching wage growth and employee numbers for signs of how persistent domestic price pressures are likely to prove, especially after data on Wednesday showed inflation in June rose to its highest since January 2024 at 3.6%.
Most BoE policymakers view annual wage growth of around 3% as desirable for consumer price inflation to stay near its 2% target over the medium term.
In May, the BoE forecast that annual private-sector wage growth, excluding bonuses, would be 5.2% in the three months to June and slow to 3.8% in the final quarter of this year.
Thursday’s data showed that this measure of pay growth slowed to 4.9% in the three months to May.
Some employers have been saying that they expect to scale back hiring due to an increase in the minimum wage and employers’ social security contributions that took effect in April, as well as a planned tightening of employment laws.
The combination of fewer job vacancies and more people looking for work is one of the key reasons why the BoE expects to continue to keep cutting interest rates at a gradual pace, despite above-target inflation.
(Reporting by David Milliken and Suban Abdulla; Editing by Catarina Demony)
Comments