Wage growth came in slightly below expectations as evidence builds that the Bank of England’s interest rate hikes are filtering through into the wider economy, new figures show.
Annual pay growth including bonuses averaged 5.6 per cent between November and January, according to figures from the Office for National Statistics (ONS). Economists had expected it to remain more or less stable at 5.8 per cent, where it stood last month.
Excluding bonuses, the figure was 6.1 per cent compared to 6.2 per cent previously.
Unemployment meanwhile crept up to 3.9 per cent from 3.8 per cent.
The figures come as the Bank of England deliberates on when to start lowering interest rates, which currently stand at a post-financial crisis high of 5.25 per cent.
Rate-setters are paying careful attention to developments in the labour market for signs that higher interest rates are working to slow the economy, thereby bringing down inflation.
The Bank’s most recent Monetary Policy Report suggested that there needed to be a “moderation in pay pressures” to bring down services inflation, a key gauge of domestic inflationary pressures.
The labour market has remained remarkably resilient despite the Bank’s aggressive rate hikes, although survey data suggests this might be starting to change.
Starting salary inflation dropped to its lowest level in nearly three years, according to the KPMG-REC jobs survey. The survey also showed that there had been an “accelerated reduction” in demand for workers alongside a “marked upturn” in candidate supply.
However, markets do not expect the Bank of England to start cutting interest rates until the summer.