UK Wage Growth Slows Less Than Expected; Jobless Rate Down

(RTTNews) - UK pay growth eased at a slower than expected pace in the fourth quarter and created a bumpy road ahead for an interest rate cut as the Bank of England awaits more signs of easing in the labor market.

In the three months to December, average earnings including bonuses rose at a slower pace of 5.8 percent annually, after the 6.7 percent gain in November.

Earnings growth was expected to ease more sharply to 5.6 percent.

Likewise, growth in average earnings excluding bonuses slowed to 6.2 percent annually from 6.7 percent in the prior period. The expected increase was 6.0 percent.

The ILO unemployment rate fell to 3.8 percent in the fourth quarter from 4.2 percent in the three months to November. The rate was also below economists' forecast of 4.0 percent.

The claimant count increased by 14,100 month-on-month to 1.579 million in January.

The estimated number of vacancies declined 26,000 sequentially to 932,000 in the three months to January.

The drop marked the 19th consecutive sequential fall but still remained above the pre-coronavirus pandemic levels.

At the same time, the payroll employment grew 48,000 from the previous month to 30.4 million in January.

Data showed that 108,000 working days were lost in December 2023 because of the labor disputes. Capital Economics economist Ashley Webb said that the slower-than-expected easing in wage growth means that the BoE does not need to rush to cut interest rates.

However, much will depend on broader price pressures, the economist noted.

The next set of inflation figures is due on February 14.

The central bank will closely watch the development of inflation and wage growth as it deliberates the course of future monetary policy.

The BoE had kept the monetary policy unchanged for the fourth straight session at a 15-year high.

At the February meeting, the bank kept the door open for the rate cut with markets pricing in a reduction as early as June.