UK Wage Growth Slowest Since 2022, Offering Relief to Bank of England

• British wages excluding bonuses grew at their slowest pace since October 2022 while the unemployment rate edged up unexpectedly, according to data, which may slightly ease the Bank of England's inflation worries.
• Regular wage growth dropped to 6.1% in the three months to January from 6.2% in the final quarter of 2023, the Office for National Statistics said. Economists had expected another reading of 6.2%. However, falling inflation means that in real terms, pay was up by 2.0% compared with a year earlier, the fastest growth since September 2021.
• The BoE is watching wage growth to gauge underlying inflation pressures as it considers when to cut interest rates. "Today's data are unlikely to warrant a major policy shift from the Bank of England, particularly with pay growth still robust and continued worries it could lead to a persistence in price pressures," Yael Selfin, chief economist at KPMG UK, said.
• "However, we expect the labour market to weaken in the coming months, which should reduce momentum in wage growth and raise the prospect of interest rate cuts from the summer onwards."
• The unemployment rate rose to 3.9% from 3.8%, reversing a dip in the final quarter of 2023 when it touched an 11-month low, although the statistics office is still overhauling its survey.
• On Monday, it said there was more uncertainty than usual about the unemployment rate, equivalent to around 0.1 percentage point in either direction, due to a problem with analyzing labour data from Northern Ireland.
• Growth in total pay - which includes more volatile bonus payments - slowed to 5.6% from 5.8%, also a bigger drop than expected and the lowest since the three months to July 2022.

(Source: Reuters)