UK Wage Growth Stays Strong but Job Market Dims

• British pay growth stayed stubbornly strong in the three months to November but there were more signs of a softening jobs market, according to data on Tuesday that reinforced the current outlook for Bank of England interest rates.
• Growth in private-sector pay excluding bonuses - a measure watched closely by the BoE as a gauge of domestic inflation pressure - rose to 6.0% in the three months to November from 5.5% in the three months to October.
• It was the strongest reading since February 2024 and suggested that the central bank's fourth-quarter forecast of 5.1% will be overshot by a wide margin. Sterling and market expectations for a Bank of England interest rate cut on Feb. 6 were largely unmoved by the data.
• Economists and investors expect the BoE to cut its main interest rate by 0.25 percentage points to 4.5% on Feb. 6, and economists polled by Reuters expect three further cuts this year. Meanwhile, markets expect one or two more after February. While pay growth pointed to persistent inflationary pressure, other measures of labour market health pointed in the opposite direction.
• However, the survey used for calculating the unemployment rate is being overhauled after response rates fell too low to be a reliable gauge of the jobs market. Separate data provided by employers to the tax authorities showed the number of employees dropped by 47,000 in December. This is the sharpest fall since November 2020, following a 32,000 drop a month earlier.

Source: (Reuters)