United Kingdom: Employment growth remains robust but wage growth continues to soften
The unemployment rate remained at a multi-decade low of 4.2% in the March-May period, where it has been for four consecutive rolling quarters. This was underpinned by ongoing strong employment growth, particularly for full-time positions: in total, 137,000 jobs were added compared to the December-February period, with the employment rate standing at an all-time high.
Despite the ongoing jobs surge, the nascent recovery in wages seen through the end of 2017 and the beginning of 2018 continued to dissipate in March-May. Nominal earnings growth excluding bonuses dipped to 2.7% from 2.8% in the prior rolling quarter. With inflation coming down, real earnings still continued to rise—albeit at a moribund pace. However, average total pay in real terms was still below the pre-crisis peak reached in 2008.
The Central Bank expects nominal regular pay growth to continue to hover slightly below 3.0% this year. However, as inflation gradually declines, this should see real wage growth tick up, although it will stay sluggish. Public-sector pay—which has been constrained in recent years by austerity measures—is likely to rise slightly as the government lifts its spending straightjacket thanks to an improved fiscal situation.