UK wage growth hits joint record high, keeping BoE under pressure By Reuters

LONDON (Reuters) -British wages excluding bonuses hit their joint highest growth rate on record, rising by 7.3% in the three months to May from the same period a year earlier, according to official data that are likely to reinforce the Bank of England’s inflation worries.

However, there were also some signs of a loosening in the labour market as the unemployment rate unexpectedly rose to 4.0% from 3.8% in the three months to April and vacancies extended their run of falls to their lowest since mid-2021.

The 7.3% increase in basic earnings matched the reading in the three months to April – which was revised up from an initial estimate of 7.2% – and in the second quarter of 2021, the Office for National Statistics said.

Economists polled by Reuters had forecast a 7.1% rise.

Sterling hit a 15-month high against the dollar as it rose by 0.3% on the day and it also rose against the euro after Tuesday’s data.

“The labour market became less tight in May and there are some signs of momentum in wage growth slowing a bit,” Ashley Webb, an economist with Capital Economics, said.

“But with wage growth still well above the levels consistent with the 2% inflation target, this won’t ease the Bank of England’s inflation fears significantly.”

Annual pay growth including bonuses sped up to 6.9%, the fastest on record excluding the coronavirus pandemic period when government job subsidies distorted the data, the ONS said.

The BoE is monitoring pay growth closely as it assesses how much inflationary pressure remains in Britain’s economy after its 13 back-to-back interest rate increases.

Governor Andrew Bailey said on Monday wage increases as well as prices charged by companies were rising too fast and he vowed to “see the job through” on fighting an inflation rate that at 8.7% is running higher than in any other big rich economy.