Media365
British wage growth came in stronger than expected in the three months to April, signalling that the country’s labour market remains more resilient than anticipated as the Bank of England (BoE) prepares to announce its latest interest rate decision.
Official labour market figures showed that average weekly earnings, excluding bonuses, increased 3.4 per cent year-on-year in the February-April period. The figure remained unchanged from the previous reading, surprising economists who had expected wage growth to ease to 3.2 per cent. The unemployment rate also delivered an unexpected improvement, falling to 4.9 per cent from 5.0 per cent.
The stronger wage data arrives at a crucial moment for the BoE, which is closely monitoring pay trends for signs of persistent inflation pressure. Policymakers are assessing whether recent increases in global oil prices, driven by tensions linked to the Iran conflict, could push up living costs and encourage workers to demand higher wages.
The central bank is widely expected to keep interest rates unchanged at 3.75 per cent as it evaluates conflicting signals from the economy. While wage growth remains above levels considered comfortable for long-term price stability, several indicators suggest that hiring demand has weakened compared with previous years.
Wage pressures have been a major challenge for the BoE since the inflation surge triggered by Russia’s full-scale invasion of Ukraine in 2022. UK inflation reached a peak of 11.1 per cent, while wage growth remained above 5 per cent for nearly three years, adding to difficulties in bringing inflation back towards the central bank’s 2 per cent target.
The BoE has previously indicated that wage growth significantly above 3 per cent could make achieving sustainable price stability harder, particularly as the UK continues to struggle with weak productivity growth.
However, broader employment indicators suggest the labour market is gradually cooling. Separate data based on tax records showed that the number of workers on company payrolls increased by only 2,000 in May. Meanwhile, April’s initial estimate showing a decline of 100,000 payroll jobs was revised to a smaller fall of 53,000.
Job vacancies also continued their downward trend, dropping by 19,000 to 707,000 in the three months to May. That marked the lowest level since early 2021 and a sharp decline from the peak of nearly 1.3 million vacancies recorded in 2022, when employers faced severe labour shortages.
The latest figures highlight the difficult position facing the Bank of England: wage growth remains strong enough to keep inflation concerns alive, but signs of a cooling jobs market could support expectations that price pressures will gradually ease in the coming months.
