Wage progress throughout the UK picked up barely within the three months to February, defying a weakening labour market and offering a contemporary problem for the Financial institution of England because it weighs when to begin reducing rates of interest.
New figures from the Workplace for Nationwide Statistics (ONS) present that common weekly earnings, excluding bonuses, rose by 5.9 per cent year-on-year within the December to February interval—up from 5.8 per cent within the earlier month. When bonuses are included, the speed held regular at 5.6 per cent. Each figures had been broadly in step with economists’ expectations.
The unemployment price remained unchanged at 4.4 per cent, however underlying labour market information factors to rising slack. The variety of job vacancies dropped by an extra 22,000—marking a continued downward development—and fell beneath pre-pandemic ranges for the primary time since 2021.
In the meantime, a flash estimate for March suggests the variety of payrolled staff declined by 78,000, a sharper drop than the 35,000 anticipated by analysts. It highlights mounting stress on hiring as companies adapt to a slowing economic system and persistently excessive rates of interest.
Regardless of this, pay progress stays sturdy by historic requirements and remains to be properly above the two to three per cent vary usually in step with the Financial institution of England’s 2 per cent inflation goal. February’s information, nevertheless, doesn’t but account for latest coverage modifications—together with the rise in employer nationwide insurance coverage contributions and the uplift within the nationwide dwelling wage, each launched in April.
Economists have warned that these modifications are prone to dampen hiring in lower-wage industries resembling retail, hospitality and social care, sectors which can be already feeling the pinch from tighter margins and ongoing value pressures.
Liz McKeown, director of financial statistics on the ONS, famous: “Regular pay growth remains strong, having increased slightly in the latest period. Growth accelerated in the public sector as previous pay awards fed through to the data, while private sector pay was largely stable.”
Whereas February introduced some surprising excellent news for GDP—month-to-month progress hit 0.5 per cent, pushed by stronger-than-anticipated efficiency in manufacturing and industrial output—the outlook stays unsure.
Considerations are mounting over the impression of latest US tariffs and a extra protectionist international buying and selling atmosphere. These elements, economists say, might drag on exports and enterprise confidence, including to downward stress on progress all through 2025.
Markets at the moment count on the Financial institution of England to implement as much as three rate of interest cuts by the top of the yr, probably taking the bottom price down to three.75 per cent. However with wage progress nonetheless operating sizzling, policymakers are prone to proceed with warning.
Yael Selfin, chief economist at KPMG UK, mentioned: “With pay growth still above the levels compatible with the inflation target, the Bank will likely maintain a cautious approach to rate cuts. That said, mounting risks to domestic demand and labour market participation may tip the balance.”
Ashley Webb, UK economist at Capital Economics, added that whereas the labour market continues to lose steam, there may be little signal but that that is feeding by into weaker pay progress. “However, if global trade disruption begins to bite, it could force employers to rethink hiring plans and slow wage settlements in the months ahead,” he famous.
