UK pay growth was steady but remained above inflation ahead of the Bank of England’s (BoE) latest interest rate decision.
UK average weekly earnings excluding bonuses rose 5.9% in the three months to January on an annual basis, according to data from the Office for National Statistics. That was unchanged from from the previous three months but continued to outstrip inflation, which rose to 3% in January.
Meanwhile, annual growth in real terms — adjusted for inflation — were up 2.2% from the previous year.
These latest figures come ahead of the Bank of England’s latest interest rate decision, due out later on Thursday. The central bank is widely expected to keep rates on hold at 4.5%, as it navigates the fallout from US president Donald Trump’s trade war and mixed signals from the UK economy.
ONS director of economic statistics Liz McKeown said: “Overall pay growth remains relatively strong, with pay growth high in both the public and private sectors despite the latter slowing slightly in the latest period.”
The unemployment rate came in at 4.4%, which was unchanged from the three months to December.
The number of payrolled employees rose by 21,000 in February, according to provisional estimates, following a revised increase of 9,000 in January.
There were 816,000 job vacancies from December to February, according to early estimates from the ONS, which was broadly unchanged on the previous three months
In addition to stubborn inflation and slowing economic growth, a number of businesses have been warning about the impact of higher labour costs. Increases in the minimum wage and in national insurance contributions, which were announced in the autumn budget, come into effect in early April.
This has complicated the economic picture for chancellor Rachel Reeves going into the spring statement on 26 March.
Read more: Bank of England poised to hold UK interest rates amid Trump trade war
Alice Haine, personal finance analyst at wealth manager Bestinvest by Evelyn Partners, said that “pay growth remained resilient in the three months to January, despite the jobs market coming under strain as businesses brace for chancellor Rachel Reeve’s minimum wage increase and the national insurance rate hike for employers.”
“Business and consumer confidence has taken a knock since the budget, and with uncertainty around what the chancellor will announce in her spending review mounting, the sense of unease for what lies ahead for people’s personal finances continues,” she said. “Job insecurity, rising inflation and the potential for wage growth to slow from here is not great news for households whose finances are still reeling from years of high living and borrowing costs.”
Jack Kennedy, senior economist at jobsite Indeed, said: “There were few surprises in the data, with the Bank of England expected to leave interest rates unchanged later today and stick to its gradualist guidance to future rate cuts.”
However, he highlighted that Indeed data suggested “conditions in the labour market have begun to soften again and that wage growth is poised to cool, paving the way for more aggressive rate cuts in the months ahead.”
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