U.K. Wages Are Growing Faster Than Any Time Since 2008
U.K. Wages Grow at Fastest Pace Since 2008 in Tight Labor Market
(Bloomberg) -- Britons are enjoying the strongest wage growth since the financial crisis a decade ago as the labor market tightens.
Average earnings excluding bonuses continued to increase an annual 3.3 percent in the three months through November and unemployment fell to 4 percent, matching the lowest rate since 1975, the Office for National Statistics said Tuesday. Separate figures showed the budget deficit unexpectedly widened in December.
With earnings forecast to accelerate further, Bank of England policy makers might normally be preparing to raise interest rates to curb inflationary pressures building in the labor market. But mounting concern that Britain could leave the European Union with no deal is expected to stay their hand. Traders put the chance of a hike this year at less than 70 percent.
What Our Economists Say:“Today’s data hasn’t made the BOE’s position any easier. The data on pay growth indicate a need to withdraw stimulus, but the uncertainty surrounding Brexit means the central bank remains reluctant to act. For now, the softening of the activity data is likely to be used as justification for policy inertia.”--Dan Hanson, Bloomberg Economics. Read the full REACT |
Key Insights
- Wage growth including bonuses accelerated to 3.4 percent in the latest three months, the fastest pace since 2008.
- The number of people in work jumped a larger-than-forecast 141,000, leaving the employment rate at a record 75.8 percent. Job creation was driven by full-time employment. Unemployment rose 8,000 as economic inactivity fell sharply.
- Pay is rising in real terms, with basic wage growth outpacing inflation by a 0.9 percentage-point margin -- the widest since the end of 2016. CPI inflation slowed further in the fourth quarter, handing a boost to households still recovering from a protracted earnings squeeze.
- Hanging over the outlook is a cooling world economy and Brexit, with Parliament deadlocked over the way forward less than 10 weeks before Britain is due to leave the European Union.
- Pay is rising fastest in the private sector (3.4 percent) but the public sector is catching up as austerity eases. Wages for state employees rose 2.9 percent ex bonuses in the latest three months, the most since the start of 2011.
- A 3 billion-pound ($4 billion) budget deficit in December left the shortfall in the first nine months of the fiscal year at 35.9 billion pounds -- almost 27 percent lower than a year earlier.
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- Wage growth in November alone stood at 3.4 percent. Unemployment in the month fell to 3.8 percent, the lowest since records began in 1992.
- The number of hours worked fell 0.1 percent after strong increases recently. Vacancies rose 10,000 in the three months through December to a joint record high of 853,000.
- The budget deficit for 2018-19 as a whole is on course to come in around 31 billion pounds, above the 25.5 billion pounds forecast by the Office for Budget Responsibility in October. But much depends on January, the biggest month of the year for cash receipts.
- Central-government revenue rose 4.3 percent from a year earlier in December, boosted by income tax, corporation tax and VAT. Spending jumped 5.3 percent, with the month seeing higher net investment and net payments to the EU compared with a credit from the bloc a year ago.
To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net
To contact the editors responsible for this story: Fergal O'Brien at fobrien@bloomberg.net, Andrew Atkinson
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