UK pay growth edges higher as job­less rate stays at decade low

The Pak Banker - - MARKETS/SPORTS -

UK un­em­ploy­ment held at its low­est rate for a decade and wage growth ticked higher as the la­bor mar­ket con­tin­ued to im­prove. Wage growth ex­clud­ing bonuses climbed to 2.2 per­cent in the three months through Jan­uary, the Of­fice for Na­tional Sta­tis­tics said in Lon­don on Wed­nes­day. Econ­o­mists had fore­cast a pickup to 2.1 per­cent from 2 per­cent in the fourth quar­ter. Un­em­ploy­ment fell by 28,000, leav­ing the rate at 5.1 per­cent, the low­est since early 2006.

"Once again the lat­est quar­terly fig­ures show con­tin­u­ing high em­ploy­ment lev­els but no sig­nif­i­cant pickup in earn­ings growth," said ONS statis­ti­cian Nick Palmer.

The data are un­likely to worry Bank of Eng­land pol­icy mak­ers, who have sig­naled they are happy to keep in­ter­est rates at a record low un­til there are clearer signs of in­fla­tion­ary pres­sures. The re­port come as Bri­tain awaits Chan­cel­lor of the Ex­che­quer Ge­orge Os­borne's lat­est bud­get, when he's fore­cast to an­nounce more spend­ing cuts as part of ef­forts to elim­i­nate the deficit by the end of the decade. He will un­veil his new fis­cal plans in an ad­dress in Par­lia­ment at 12.30 p.m. in Lon­don.

The pound was trad­ing at $1.4113 as of 9:40 a.m. in Lon­don, down 0.3 per­cent from Tues­day. Job­less ben­e­fits, a nar­rower mea­sure of un­em­ploy­ment, fell 18,000 Fe­bru­ary to 716,700, leav­ing the rate at 2.1 per­cent, the low­est since 1974. In Jan­uary, the count fell 28,400 in­stead of the 14,800 drop orig­i­nally re­ported. The fig­ures in­clude re­vi­sions go­ing to May 2013 that re­flect im­proved es­ti­mates of Uni­ver­sal Credit, a new type of wel­fare ben­e­fit. The ef­fect of those re­vi­sions re­duced the claimant count by 67,700 in 2015. Wage growth in­clud­ing bonuses ac­cel­er­ated to 2.1 per­cent in the three months through Jan­uary from 1.9 per­cent in the fi­nal quar­ter of 2015.

The num­ber of peo­ple in work rose 116,000 to a record 31.4 mil­lion, while un­em­ploy­ment fell to 1.69 mil­lion. In the fourth quar­ter, em­ploy­ment in cen­tral and lo­cal govern­ment rose by 11,000 to 5.17 mil­lion, partly re­flect­ing hir­ing in the Na­tional Health Ser­vice.

Sin­gle month fig­ures show the job­less rate fell to 5 per­cent in Jan­uary from 5.3 per­cent in De­cem­ber, while av­er­age earn­ings ex­clud­ing bonuses edged up to 2.2 per­cent from 2.1 per­cent.

La­bor data has proved a puz­zle to BOE pol­icy mak­ers in re­cent years, with record em­ploy­ment and a fall­ing job­less rate not yet boost­ing wage growth.

The BOE will prob­a­bly keep its key in­ter­est rate at 0.5 per­cent when it an­nounces its lat­est de­ci­sion on Thurs­day. With in­fla­tion far below their 2 per­cent tar­get, of­fi­cials have in­di­cated they're in no rush to raise the rate, which has been at a record low for seven years.

Still, they're mon­i­tor­ing the job data for any signs that the tight­ness in the la­bor mar­ket will gen­eral in­fla­tion pres­sures. Dan Han­son, an econ­o­mist at Bloomberg In­tel­li­gence in Lon­don, says the U.K. may see only a mod­est pickup in pro­duc­tiv­ity growth, which would mean unit wage costs ac­cel­er­at­ing.

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