UK pay growth drops to lowest in nearly 2 years, joblessness falls
LONDON (Reuters) – British average weekly earnings, excluding bonuses, were 5.4% higher than a year earlier in the three months to the end of June, the Office for National Statistics said on Tuesday.
Economists polled by Reuters had forecast regular wage growth of 5.4%.
The Bank of England said it would continue to keep a close eye on wage growth when it cut interest rates on Aug. 1 after keeping them at a 16-year high of 5.25% for nearly a year.
Regular pay has been growing at roughly double the pace the BoE thinks is compatible with keeping inflation at its 2% target over the medium term, and the central bank expects data on Wednesday to show inflation back above target.
However, employers expect lower headline inflation to reduce pressure to raise wages over the coming year. The Chartered Institute of Personnel and Development on Monday said employers expected to raise pay by 3% – the lowest expectation in two years – while a BoE survey pointed to pay rises of 4.1%.
Last month newly elected Labour Party finance minister Rachel Reeves approved pay rises of at least 5% for millions of public sector workers, including a 22% rise for junior doctors over two years to resolve a long-running industrial dispute.
The BoE is more focused on growth in private-sector pay, which it says has a more direct impact on inflation, and forecasts this will slow to 5% in the final quarter of this year and 3% in late 2025.
