British wage growth excluding bonuses hit 6.0% in early 2024, surpassing forecasts and prompting Bank of England to consider rate cuts. Despite strong pay growth, signs of a cooling labor market emerge.
British wages excluding bonuses—closely watched by the Bank of England as it considers when to cut interest rates—grew by a stronger-than-expected 6.0% in the first three months of 2024 compared to the same period a year earlier, data showed.
Economists polled by Reuters had forecast wage growth of 5.9%, which would have been slightly lower than the 6.0% increase in the three months to February.
The BoE is monitoring for any signs that Britain’s still strong wage growth could revive high inflation. However, it signaled last week that it might start cutting interest rates from their 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 that the BoE will consider before its next meeting.
Finance minister Jeremy Hunt, who is trying to help Prime Minister Rishi Sunak rein in the big opinion poll lead of the opposition Labour Party before an election this year, highlighted 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.
Sterling briefly edged up against the U.S. dollar after the figures were published. Despite the stubbornly strong pay growth, there were some signs in Tuesday’s data that Britain’s labor market was losing some of its heat.
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.
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