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British wages grew at the slowest pace in almost a year, according to official data published today that added to signs of a gradual cooling of the inflationary pressure in the labour market that has worried the Bank of England.
Growth in wages excluding bonuses slowed for a third release in a row to an annual 6.6% in the three months from September to November compared with 7.2% in the three months to October, the Office for National Statistics said, matching the median forecast in a Reuters poll.
It was the weakest increase in regular earnings since the three months to January 2023.
Yael Selfin, chief economist at KPMG UK, said the deceleration in pay growth signalled further weakness for the labour market ahead.
“The marked slowdown in pay growth will ease the Bank of England’s concerns of a potential wage-price spiral, which could lead to faster falls in inflation,” Selfin said.
“Vacancies are also expected to fall further, which could see pay growth normalising towards levels consistent with the inflation target by the end of the year. This will likely bolster the case for interest rate cuts later this year,” the economist said.
The Bank of England has been worried that pay is rising too quickly for inflation to fall to its 2% target, despite a slowdown in the headline rate of price growth in recent months.
Including bonuses, which can be volatile, pay growth slowed to 6.5% from 7.2% in the three months to October.
“While annual pay growth remains high in cash terms, we continue to see signs that wage pressures might be easing overall,” ONS director of economic statistics Liz McKeown said.
“However, with inflation still falling more quickly, earnings continued to grow in real terms,” she added.
Britain’s economy might have fallen into a recession in the second half of 2023, data showed last week.
Today’s ONS release showed vacancies fell for the 18th time in a row in the three months to December, dropping by about 49,000 on the quarter.
However inflation pressures remain in the labour market with many employers increasing pay sharply as they struggle to retain or hire staff.
The Bank of England raised borrowing costs 14 times between December 2021 and August 2023 and its benchmark rate has remained at a 15-year high since then.
Governor Andrew Bailey and other top officials at the Bank of England said repeatedly late last year that rates were likely to stay high for “an extended period”.
Mr Bailey had been due to speak to politicians later today but his appearance was postponed.
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