UK wage growth slows to lowest in over 5 years
What's the story
The UK's wage growth has slowed down sharply, hitting its lowest in over five years. According to the Office for National Statistics (ONS), average earnings rose by just 3.8% in the three months leading up to January, down from 4.2% previously. This is a bigger drop than what City economists had predicted and marks the slowest wage growth rate in more than five years.
Employment stability
Unemployment rate steady at 5.2%
Despite the slowdown in wage growth, the UK's unemployment rate has remained steady at 5.2%. Liz McKeown, ONS's Director of Economic Statistics, said that labor market conditions were largely unchanged at the start of this year. She noted a slight increase in payroll numbers but overall described the recent picture as broadly flat with unemployment remaining stable and vacancies largely stable too.
Wage stagnation
Regular wage growth at lowest in over 5 years
McKeown also highlighted that regular wage growth is at its lowest in over five years, with pay growth slowing down in both the private and public sectors. The slowdown in wage growth is not expected to influence Bank of England policymakers who are likely to keep interest rates unchanged at 3.75% amid Middle East conflict and rising oil prices.
Award reduction
Decline in pay awards across private and public sectors
Pay surveys have shown a decline in pay awards over the past year across both private and public sectors. Before the Iran conflict, central bank policymakers were expected to cut interest rates to prevent an economic recession. However, fears of inflation due to rising oil prices are likely to keep them from doing so. On Wednesday, the US Federal Reserve also kept its rates unchanged at a range of 3.5% to 3.75%.