The pace of British pay growth was little changed and there were others signs of stability in the jobs market, according to official data that contrasted with warnings of a hit to hiring from employers upset about an imminent tax increase.
Private sector pay, excluding bonuses — a key gauge for the Bank of England — rose by 6.1% in the three months to January, compared with the same period a year earlier, marginally slower than a 6.2% increase at the end of 2024, Thursday’s data showed.
The BoE, which has said recent wage growth is too high, is widely expected to keep interest rates on hold at 1200 GMT.
Pay growth across the economy, excluding bonuses, stood at 5.9%, unchanged from the fourth quarter, the Office for National Statistics said. Including bonuses, pay growth slowed to 5.8% from 6.1%.
A Reuters poll of economists had pointed to both economy-wide measures of wage growth rising by 5.9%.
“There’s no shortage of surveys pointing to weaker hiring intentions in the face of next month’s employer tax hikes,” said James Smith, an economist with ING. “But for now, at least, the official data shows little sign of that translating into lower employment or higher redundancies.”
Data provided by employers to the tax authorities showed the number of employees climbed by 21,000 in February, stronger than a revised increase of 9,000 in January.
In a further sign of a stabilising jobs markets, the number of job vacancies in the December-to-February period stood at 816,000, the first increase when comparing a three-month period with the previous one since April-to-June 2022.
Luke Bartholomew, deputy chief economist at Aberdeen, said there was nothing in the data that would change the BoE’s thinking about the economy.
The central bank is trying to gauge whether inflation pressures in the labour market are easing sufficiently for it to continue cutting interest rates.
The ONS said the latest figures on the labour market had been shared with the BoE’s Monetary Policy Committee before its discussions this week.
Sterling and government bond prices were little changed against the dollar after the data release.
A rise in the social security contributions that employers pay starting in April is expected to lead to slower wage growth as well as weaker hiring.
Data published on Wednesday showed pay settlements granted by British employers fell back in line with inflation for the first time since October 2023.
The ONS said Britain’s unemployment rate, based on a survey that the ONS is overhauling and is no longer considered an accurate gauge, held at 4.4%.
Yael Selfin, chief economist at KPMG UK, said the risk of an escalation in global trade tensions triggered by U.S. President Donald Trump’s import tariffs on trading partners could threaten the relative stability of Britain’s jobs market.
“Sentiment is likely to weaken further if global trade frictions intensify over the coming months, which could lead to a continued decline in hiring intentions and an increase in unemployment,” Selfin said.
(Writing by William SchombergEditing by Rachna Uppal and Tomasz Janowski)
