UK wage growth showed little sign of easing in the three months to March, according to official figures that will reinforce policymakers’ concerns over the pressures fuelling inflation.
The Office for National Statistics said average private sector earnings, excluding bonuses, were 7 per cent higher than a year earlier, unchanged from an upwardly revised reading for the three months to February, while growth in public sector earnings reached a 20-year high of 5.6 per cent.
Growth in total pay was slightly lower, because of a less generous bonus season than in 2022, but earnings across the economy were still 5.8 per cent higher than a year ago.
This leaves earnings trailing far behind living costs, but still growing faster than the Bank of England thinks consistent with its 2 per cent inflation target. Thomas Pugh, economist at the audit firm RSM UK, said the figures left the door “open wide to another rate hike in June” as the labour market was not easing fast enough for the monetary policy committee’s comfort.
However, Philip Shaw, economist at Investec, said signs of the jobs market cooling were becoming clearer and, referring to the BoE’s rate-setting committee, could “ease some of the MPC’s angst over persistent inflation”.
Tuesday’s figures suggested that high inflation and rising interest rates were starting to weigh on hiring. The unemployment rate increased by 0.1 percentage points to 3.9 per cent as people who had previously chosen not to look for work returned to job-seeking.
The rate of economic inactivity fell 0.4 percentage points from the previous three-month period, to 21 per cent, largely because of students starting to work.
The ONS said this reflected the biggest flow from inactivity into employment on record, although the UK workforce remains smaller than it was before the pandemic, partly because of record levels of long-term sickness.
Hannah Slaughter, economist at the Resolution Foundation, said the figures would allay fears “that the pandemic had permanently shrunk the workforce”. James Smith, economist at ING, noted that there had also been a “healthy increase” in the number of non-UK nationals in employment, including a 5 per cent increase in EU nationals over the last quarter — pointing to “an improvement in worker supply”.
A gradual slowdown in hiring could also be starting to take the edge off labour shortages that have been fuelling wage growth since the UK economy reopened in the aftermath of Covid-related lockdowns.
The ONS said the number of payrolled employees fell by 136,000 in April, to 29.8mn, although it underlined that these figures — based on HM Revenue & Customs administrative data — were provisional and likely to be revised. The number of vacancies reported by employers has been falling for much of the last year but stabilised in April and remains well above pre-pandemic levels.
“It’s too early to say whether the labour market is weakening, but our assessment is that there is still very strong demand and that it’s more likely a lack of supply than a lack of demand that is holding back growth,” said Tony Wilson, director of the Institute for Employment Studies.
Jane Gratton, head of people policy at the British Chambers of Commerce, said the figures showed that skills shortages and unfilled vacancies were still the “stark reality for many businesses across all sectors”.
Guy Opperman, employment minister, said the figures represented “progress” adding that he was “focused on matching jobseekers with roles and businesses with a skilled and resilient workforce”.
Source: Economy - ft.com
