British wage growth remained robust in the three months to November 2024, despite increasing indications of a weakening labor market, according to data released on Tuesday. The figures reaffirm the Bank of England’s (BoE) current stance on interest rates as it grapples with persistent inflationary pressures. Private-sector pay, excluding bonuses a key measure monitored by the BoE rose to 6.0% during the period, up from 5.5% in the three months to October.
This represents the strongest increase since February 2024, suggesting that pay growth in the final quarter will significantly exceed the central bank’s forecast of 5.1%. Despite these developments, the pound and market expectations for a BoE interest rate adjustment remained steady. Economists and investors anticipate a 0.25 percentage point cut to the main interest rate, bringing it to 4.5% at the next monetary policy meeting on February 6.
Market projections suggest one or two additional cuts this year, while some economists foresee three. However, broader indicators signal challenges in the labor market. Several business surveys have reported a steep decline in employment prospects following significant tax increases on employers introduced by Finance Minister Rachel Reeves in the October 30 budget. The official unemployment rate rose to 4.4% in the three months to November, reaching its highest level since the three months to May.
This uptick aligns with the median forecast in a recent poll of economists. However, the survey underpinning this metric is currently undergoing revisions due to declining response rates, raising questions about its reliability. Separate data from tax authorities highlighted a significant decline in payroll employment, with 47,000 fewer employees recorded in December 2024. This marked the sharpest drop since November 2020, following a reduction of 32,000 in the previous month.
“The latest figures show a familiar combination of strong wage growth despite further cooling in the labour market, with vacancies falling and an uptick in unemployment. Sticky wage growth remains a key concern for the Bank of England,” noted Jack Kennedy, an economist at the online jobs portal Indeed. As the BoE balances persistent wage pressures with signs of a softening job market, the upcoming interest rate decision will likely remain a focal point for economic observers. – By EuroWire News Desk.
