UK unemployment fell to 4.9% in the three months to April, while wages excluding bonuses held at 3.4% as the bank of england base rate decision moved closer. The labour report leaves policymakers with a tighter jobs picture than economists expected, and it keeps pressure on borrowing costs for households and businesses if pay growth stays sticky.
ONS Pay Data Turns Sharper
4.9% was below the 5% economists had expected, and it marked a drop from 5% in the three months to March. Average wages excluding bonuses also rose 4.4% after a revision up from 4.1%, even though the headline annual measure remained at 3.4% for the period to April.
5.1% public-sector regular earnings growth and 2.9% private-sector growth show where the strain still sits. Andrew Bailey had raised concern about strong public sector pay for the monetary policy committee, but the gap leaves the Bank of England more focused on the private side, where wage growth is still easing.
Private Sector Pay Slows
2.9% in the private sector is now below 3%, according to James Smith, and he said the annual rate is down from 5.2% a year ago. He added that the three-month annualised rate is even lower and points to further easing in the near term.
"While the Bank of England can’t totally ignore [the public sector], it remains much more focused on the private sector. And here pay growth is still easing off."
"The annual rate is now below 3%, a sizeable drop from 5.2% a year ago. The three-month annualised rate is even lower and suggests that the annual rate has further to fall in the near-term."
Rates at 3.75% Thursday
3.75% is where the monetary policy committee was expected to hold rates later on Thursday, even as the latest labour figures kept alive the case for tighter policy later in the year. Ashley Webb said, "Today’s data release increases the chances of one or two “insurance” hikes later this year."
"The big picture is that the labour market is still very weak, and likely to weaken further," he said, with PAYE payroll employment adding 2,000 in May after a fall of 53,000 in April. The consumer prices index stayed at 2.8% in May, so the next read on whether wage pressure is fading will shape how much room the Bank of England has to move after Thursday.
