British wages excluding bonuses grew stronger than expected in the first three months of 2024, compared to the same period a year earlier, the official labor data showed on Tuesday. This indicator puts wages firmly in the sights of the Bank of England (BoE), which has been contemplating potential interest rate cuts.
Economists polled by Reuters forecast wage growth to be 5.9%, which would have been lower than the 6.0% increase in the three months to February.
The BoE is monitoring for any signs that Britain’s strong wage growth could revive high inflation, although last week, it signaled that it could start cutting interest rates from its current 16-year high of 5.25% as early as June.
Tuesday’s figures are the first of two labor market data releases from the Office for National Statistics (ONS) that the BoE will consider before its next meeting.
Despite stubbornly strong pay growth, the data again showed some signs that Britain’s labor market was losing some of its heat.
It showed that the unemployment rate in the U.K. rose to 4.3% in the three months to March, which is the highest since May to July last year and up from 4.2% in the previous three months.
Finance Minister Jeremy Hunt, who is trying to help Prime Minister Rishi Sunak rein in the opposition Labour Party’s big opinion poll lead before an election this year, pointed to how wages were outstripping inflation.
“This is the 10th month in a row that wages have risen faster than inflation, which will help with the cost of living pressures on families,” Hunt said in a statement.
Total pay, which includes more volatile bonus payments, rose by 5.7%, above economists’ expectations of a 5.5% increase.
Private sector regular pay – a key metric for the BoE – eased slightly to 5.9% from 6.0% in the three months to February.
The sterling briefly edged up against the U.S. dollar after the figures were published.
The ONS said the unemployment rate rose to 4.3%, its highest since the three months to July 2023, although it cautioned that the survey from which the jobless rate is calculated is still being overhauled.
“We continue to see tentative signs that the jobs market is cooling, with both employment from our household survey and the number of workers on payroll showing falls in the latest periods,” Liz McKeown, ONS’s director of economic statistics, said.
“At the same time, the steady decline in the number of job vacancies has continued for a 22nd consecutive month, although numbers remain above pre-pandemic levels.”
“Earnings growth in cash terms remains high, with the recent falls in the rate now leveling off while, with inflation falling, real pay growth remains at its highest level in well over two years,” she added.