Wage growth dips; employment rate hits new high
Average wage growth for UK employees dipped slightly in the three months to May, according to figures from the Office for National Statistics (ONS).
The latest earnings estimates suggest average wages not adjusted for inflation, increased by 2.7% excluding bonuses (down from 2.8% for the three months to April) and by 2.5% including bonuses (from 2.6%).
The figure came in above May’s inflation reading of 2.4%. But Ed Monk, associate director for personal investing at Fidelity International, said any reason for households to cheer could be short-lived as there’s a possibility inflation could overtake wage growth for June.
“If inflation does jump back up after this weakening in pay growth, then it adds to the conundrum for the Bank of England’s Monetary Policy Committee who are desperate to deliver a rate hike in August’s meeting,” he said.
“Higher inflation would support that position but an absence of sustained real wage growth as well as ongoing fears about the impact that Brexit will have on the UK economy means we could see the ‘unreliable boyfriend’ make an appearance again if Mark Carney and the central bank is forced to make another U-turn come August.”
If there is a rate hike in August, the Bank of England has made it clear that any additional rate rises will be at a “gradual pace and to a limited extent” so it will be some time before interest rates catch up with inflation.
Ben Brettell, senior economist at Hargreaves Lansdown, said given the uncertain political climate, there’s a real chance policymakers will “sit on their hands and wait for firmer signals the economy is on the right track before risking raising borrowing costs”.
Employment data hits new high
The ONS figures revealed that in the three months to May 2018, the number of people in work increased and the number of unemployed decreased.
Between March and May, the employment rate was 75.7%, higher than for a year earlier (74.9%), the highest since comparable records began in 1971.
There were 32.40 million people in work, 388,000 more than for a year earlier.
Unemployment over the three months came in at 4.2%, down on the 4.5% a year earlier.
In total, there were 1.41 million unemployed people, which is 12,000 fewer than for the previous three months.
Both sterling and the FTSE were little changed after the data was released.