UK pay growth slows as jobless rate rises to highest since 2021
LONDON, June 10 (Reuters) - British pay growth slowed sharply in the three months to April and unemployment rose to its highest in nearly four years, official data showed on Tuesday, potentially easing the Bank of England's caution about how quickly to cut interest rates.
Average weekly earnings, excluding bonuses, were 5.2% higher in the February-to-April period versus a year earlier, their weakest pace of growth since the third quarter of 2024 and down from a downwardly revised 5.5% in the three months to March.
A Reuters poll of economists had mostly forecast regular wage growth of 5.3%.
The unemployment rate, based on a survey that the ONS is overhauling and which many economists have doubts about, rose to 4.6% from 4.5% in the first quarter of 2025, following a rise in employers' social security contributions at the start of April.
The BoE is trying to gauge whether inflation pressures in Britain's labour market are easing sufficiently for it to continue cutting interest rates. It is expected to keep rates on hold next week.
Yael Selfin, chief economist at accountants KPMG, said Tuesday's figures suggest the rise in firms' labour costs would probably put a brake on wage growth.
"The MPC is unlikely to vote for a cut next week, as it will likely require more evidence that wage growth is falling back to levels consistent with the inflation target," Selfin said.
A 25 billion pound ($34 billion) increase in employers' social security contributions and a 6.7% hike in the minimum wage came into force in April.
Domestic wage and price developments are likely to be more important for future reductions in borrowing costs than U.S. trade policy, BoE Governor Andrew Bailey has said, although April's U.S. tariffs did help swing some policymakers' decision to vote for a cut at its last meeting in May.
In the private sector alone - watched closely by the BoE - earnings excluding bonuses rose by 5.1% in the three months to the end of April, also the weakest pace since the third quarter of 2024 the Office for National Statistics said.
Sterling weakened against the U.S. dollar immediately after the data was published and investors also priced in a higher chance that the BoE will cut rates twice more this year.
Vacancies fell by 63,000 in the three months to May, their lowest level since the three months to April 2021.
($1 = 0.7396 pounds)
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