ONS data

Wage growth dampens hope of early interest rate cut

Pay rises are delaying interest rate cuts, say analysts

Wage growth has slowed further but continues to outpace price rises, putting pressure on the Bank of England to delay cuts to interest rates.

Average earnings (excluding bonuses) grew by 6.2% per year in the October-December quarter, new data from the Office for National Statistics shows, down from 6.7% the month earlier. Total pay growth (including bonuses), slowed to 5.8% from 6.7%.

Stripping out inflation real total earnings rose by 1.6%, and regular pay grew by 1.9%.

Vacancies have fallen for the 19th consecutive period, but the number of people looking for work has barely changed.

UK unemployment came in at 3.8%, down from 4.2% in the three months to November and market expectations of 4%.

ONS director of economic statistics Liz McKeown said: “It is clear that growth in employment has slowed over the past year. Over the same period the proportion of people neither working nor looking for work has risen, with historically high numbers of people saying they are long-term sick.

“Job vacancies fell again, for the nineteenth consecutive month. However, there are signs this trend may now be slowing.

“The number of days lost to strikes went up in December, with the majority coming from the health sector.

“In cash terms earnings are growing more slowly than in recent months, but in real terms they remain positive, thanks to falling inflation.”

Ben Keighley, founder of AI recruitment platform Socially Recruited, said:  “The labour market is still posing a headache for the Bank of England, and the low unemployment rate and earnings growth of 5.8% could have the knock-on effect of keeping interest rates higher for longer.

“Wage growth might be cooling, but it will take a much more dramatic slowdown in pay for the Bank to be content that it can meet its 2% inflation target.”

He said the number considered “economically inactive” because of long-term sickness remains a major concern.

The data came with a warning of a different kind from the ONS which admitted it could not guarantee its accuracy. It suspended its Labour Force Survey in the autumn because of falling response rates. An updated survey will not be in place until September.

Bank of England governor, Andrew Bailey, has said the uncertainty around the figures is “posing challenges” as it uses ONS data to gauge unemployment.

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