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UK wage growth slowed in the three months to July, as payroll employment and hiring weakened, official data showed on Tuesday.
Annual earnings growth, excluding bonuses, declined to 5.1 per cent, down from 5.4 per cent in the three months to May, the Office for National Statistics said. The figure was in line with analysts’ expectations.
Including bonuses, wage growth slowed to 4 per cent but this figure was skewed by large one-off payments to public sector workers last year.
The ONS said tax records showed payrolled employment fell by 6,000 in July and by 59,000 in August, with vacancies also declining.
Policymakers on the Bank of England’s monetary policy committee want to see clear evidence that pay pressures driving service price inflation are easing before they cut interest rates again, following August’s decision to reduce the bank rate to 5 per cent.
Ashley Webb, economist at the consultancy Capital Economics, said the data was “encouraging . . . as a sign that labour market conditions are continuing to cool” but probably not enough to prompt an immediate quarter-point interest rate cut at September’s MPC meeting.
The wage figures are set to determine next year’s increase in the state pension, which rises each year by whichever is the highest out of wage growth and inflation the previous September, or 2.5 per cent.
Other business surveys suggest that pay growth is starting to slow from near-record highs, but only gradually, while economic activity has picked up in recent months.
Economists say the BoE may be more hesitant about cutting interest rates than the US Federal Reserve, which has seen a clear weakening in the labour market, or the European Central Bank, which has just seen a sharp fall in inflation.
The BoE has made it clear it is looking at a wide range of surveys to gauge the true state of the labour market, because ongoing problems with the ONS’ labour force survey (LFS) have made the official data unreliable.
Tuesday’s figures on payroll employment were at odds with LFS-based figures showing the unemployment rate was 4.1 per cent in the three months to July, unchanged from a month earlier but down from 4.3 per cent the previous quarter.
On the LFS measure, employment also strengthened and economic inactivity fell.
The statistics agency acknowledged “ongoing challenges in assessing the coherence” of labour force survey-data with other measures of employment, including the payroll figures and its survey of workforce jobs.
These non-LFS sources appeared more reliable and both pointed to “a sustained moderation of growth in employment over the last year,” the ONS said.
The ONS’ earnings figures are based on a different survey and are unaffected by the problems with the LFS.
Sterling shrugged off the figures, rising only 0.05 per cent to $1.3079.
