UK wage growth slowed in the three months to June despite an unexpected fall in unemployment, official figures show.
Average earnings excluding bonuses rose 5.4 per cent in the period to June, down from 5.7 per cent in the three months to May, according to data from the Office for National Statistics (ONS).
This figure marks the slowest pace of growth since May to July 2022.
Including bonuses, annual wages grew 4.5 per cent – a sharp slowdown from 5.7 per cent and below economists’ expectations of 4.6 per cent. The ONS noted that this figure was affected by comparisons with June 2023, when NHS one-off bonuses were paid.
Ratesetters are looking mostly closely at private-sector wage growth, which slowed to 5.2 per cent, from 5.6 per cent.
Unemployment rose to 4.2 per cent, from 4.4 per cent. Economists’ had expected a figure of 4.5 per cent.
Policymakers have said they are looking for signs of lower wage growth, a slowdown in services inflation and that the jobs market is cooling before lowering interest rates again. The latest jobs data bolsters the case that fewer inflationary forces are originating from the labour market.
A report from the Chartered Institute of Personnel and Development on Monday showed UK employers expected to raise pay by three per cent over the next 12 months, the lowest level in two years and down from 4.1 per cent in a similar survey by the Bank earlier this month.
Still, hawkish ratesetter Catherine Mann said on Monday that wage pressures in the economy could take years to dissipate and that surveys suggested companies were still expecting to make relatively big increases to both wages and prices.
Policymakers have complained about the reliability of official jobs data after the ONS suspended its flagship Labour Force Survey last October due to low response rates. Wage figures are not affected.
The ONS had planned to introduce a new “transformed” survey in September but last month said it would postpone the rollout until 2025 after uncovering data collection issues.
This morning’s figures come as the first instalment in a slew of official economic data due to be published this week that will inform policymakers’ decision whether to cut interest rates in September, after the Bank lowered borrowing costs for the first time since March 2020 earlier this month.
Further ONS data is set to keep the Bank’s ratesetters wary about cutting rates again. UK inflation is expected to accelerate for the first time this year to 2.3 per cent, moving away from the central bank’s two per cent target that was reached in May and sustained in June.