Although other data released on Tuesday revealed a slowdown in the UK job market, basic wage in Britain rose again faster in the last three months of 2022, highlighting Bank of England concerns about inflationary heat in the economy.
Britain’s unemployment rate hovered near five-decade lows even as the country was on the brink of recession, while employment rose. With the exception of the coronavirus pandemic, when earnings changes were affected by worker furloughs, salary excluding bonuses rose 6.7%, marking the biggest gain since records began in 2001.
The Office for National Statistics (ONS) reported that total wages increased by 5.9% annually from October to December, which was the slowest increase since the three months ending in July last year. However, it was mainly due to abnormally strong bonus growth at the end of 2021.
Reuters polled economists, who predicted a 6.5% rise in the ex-bonus metric and a 6.2% rise in overall pay. The BoE is keeping an eye on the rate of wage growth in Britain as it determines how much further to raise interest rates after doing so 10 times in a row since December 2021. It has provided a hint that the streak could be coming to an end. .
Following the release of the statistics, the British pound appreciated against the dollar and the euro before turning around. Investors modestly increased their bets on the BoE, raising interest rates another quarter point in March.
What keeps unemployment in the UK low
The labor market was anticipated to cool, but Tuesday’s data indicated it could keep the inflationary heat in the economy for a few more months. And with activity ending the previous year a bit stronger than the Bank had anticipated, Webb added: “We think the Bank of England may have one or two more rate hikes in the works.”
Despite the faster-than-average rate of wage increases, workers are experiencing income erosion due to inflation, which is still hovering around 10%. The last three months of 2022 saw the biggest drop in total wages since early 2009, falling 4.3% when adjusted for the BoE-targeted consumer price index.
According to the Reuters poll, the unemployment rate held steady at 3.7% in the three months to December, not much more than its lowest point in nearly 50 years. For the sixth consecutive month, vacancies decreased from November to January, falling by 76,000 to 1,134 million.
The percentage of people not working or looking for work fell to 21.4% in the three months to December, a decrease of 0.3 percentage points from the previous three months. According to the ONS, a record number of people came out of economic activity between October and December as more and more returned to work, which could allay one of the BoE’s concerns about the labor market.
Before submitting his annual budget to parliament on March 15, British Chancellor Jeremy Hunt is finalizing initiatives to increase the activity rate. The ONS said that while the unemployment rate rose to 1.1 by the end of 2022, it was still lower than pre-pandemic levels of about 1.6.
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