By Suban Abdulla and David Milliken
LONDON (Reuters) -Pay growth in Britain slowed sharply and unemployment rose to its highest in nearly four years in the three months to April, official data showed on Tuesday, potentially making the Bank of England less cautious about cutting interest rates further.
Wage growth excluding bonuses slowed to 5.2%, its weakest since the three months to September and down more than expected from 5.5% in January to March this year. The jobless rate rose to 4.6% from 4.5%, its highest since the three months to May 2021, the Office for National Statistics said.
The April data was the first since employers were hit by a 25 billion pound ($34 billion) rise in social security contributions which came into force at the start of the month, as well as a 6.7% increase in the minimum wage.
The downturn appeared to gather pace in May, according to separate tax office data which showed a slump of 109,000 in the number of employees on company payrolls, the most since May 2020 at the height of the COVID-19 pandemic.
The Bank of England – which is expected to keep rates on hold at next week’s meeting – has been trying to gauge if inflation pressures in Britain’s labour market are easing sufficiently for it to continue cutting interest rates at its current quarterly pace.
“While the bar for the Bank of England to speed up rate cuts seems to be set fairly high, this data helps cement cuts in August and November,” James Smith, economist at Dutch bank ING, said.
Sterling fell three quarters of a cent against the U.S. dollar, two-year gilt yields dropped to a two-week low and interest rate futures priced in a greater chance of two further rate cuts this year following the data.
WAGE PRESSURES SOFTEN
BoE Governor Andrew Bailey said last month that domestic wage and price developments were likely to be more important for future reductions in borrowing costs than U.S. trade policy, although April’s U.S. tariffs did help swing some policymakers’ decision to vote for a cut at its last meeting in May.
In the private sector alone – watched closely by the BoE – earnings excluding bonuses rose by 5.1% in the three months to the end of April, also the weakest pace since the third quarter of 2024 the Office for National Statistics said.
Growth in total pay, including bonuses, slowed to 5.3% in April from an upwardly revised 5.6% compared to economists’ forecasts for 5.5%.
There were also other signs of loosening in Britain’s jobs market.
Vacancies fell by 63,000 in the three months to May to 736,000, their lowest level since the three months to April 2021.
Andrew Griffith, spokesman for business and trade for the opposition Conservative party, said the rise in unemployment was not surprising.
“Businesses are still absorbing a 25 billion pound jobs tax but things are about to get even worse as … (the government) hits businesses with higher regulation,” Griffith said.
Labour’s employment minister, Alison McGovern, said the ONS data showed that half a million more people were in work than when Labour won a national election last July and that wages had grown faster since then than during a decade of Conservative-led rule after 2010.
With the country’s public finances under pressure, finance minister Rachel Reeves is due to deliver her first multi-year spending review on Wednesday to set budgets for public services.
($1 = 0.7427 pounds)
(Reporting by Suban Abdulla; Editing by Sarah Young, David Milliken, Kate Holton and Susan Fenton)
Comments